(Bloomberg) -- President Xi Jinping’s warm welcome for the Italian prime minister offers a pointed reminder to European leaders of the economic benefits of engaging with China — and also of the potential risks.
Italian diplomats hailed Giorgia Meloni’s five-day trip as a success after she secured a sit-down with Xi and a clutch of cooperation deals, as well as glowing reviews in Chinese state media. To pull that off, she avoided criticizing her host for supporting Russia’s war machine or overcapacity in key tech industries, according to public statements, though did warn trade ties between Italy and China must be rebalanced.
Her reception suggests Beijing is seeking to fan tensions between European Union members with the promise of lucrative bilateral ties for some, even as the 27-nation bloc as a whole moves closer to the tougher US approach to trade with the world’s no. 2 economy.
“There is probably a bit of that divide-and-conquer mindset informing the welcome,” said Ja Ian Chong, an associate professor of political science at the National University of Singapore.
Meloni had faced a delicate balancing act when she landed in Beijing on Saturday aiming to reset links with Beijing after controversially pulling Italy out of Xi’s Belt and Road Initiative last year. But Xi, too, can benefit from a relationship with Italy as both sides look to prepare themselves for the potential return of Donald Trump to the White House next year.
By singling out Meloni and Hungary’s Viktor Orban, the most prominent far-right leaders in the EU, Xi is also playing on the faultline running through European politics as new populists emerge to challenge, and in some cases displace, establishment parties. Both Olaf Scholz of Germany and France’s Emmanuel Macron have seen their authority compromised by domestic problems amid growing support for the far right.
While Macron was treated to a tea in a residence once used by Xi’s father when he visited China last year, he ultimately walked away with few concrete gains. Scholz echoed US complaints about an unfair glut of Chinese exports when he visited in April.
“There’s also some calculation that Macron might be in a weaker position, whereas Meloni is representative of the resurgent right,” Chong said.
Meloni’s willingness to bring Xi into discussions over Russia’s war in Ukraine also suits the Chinese leader.
In recent years, the Chinese president has sought to portray himself as a neutral arbiter on the world stage capable of brokering agreements such as last year’s accord between Iran and Saudi Arabia.
Chinese diplomacy was particularly active in the week leading up to Meloni’s visit, with Ukraine’s foreign minister, Dmytro Kuleba, visiting Beijing for Kyiv’s first high-level trip in eight years. Chinese officials also presided over a gathering of rival Palestinian factions who signed an agreement to establish an interim reconciliation government in a document dubbed the “Beijing Declaration.”
One Italian diplomat argued that despite Xi’s support for Russia, bringing China into negotiations on Ukraine is valuable because it’s one of the few countries that can influence Russian President Vladimir Putin.
Meloni has little power to influence the European Commission’s probe into subsidies for Chinese electric vehicles, which is the most pressing bilateral issue between Beijing and the EU. But if Xi can encourage countries like Italy to consider a more conciliatory approach to China then he’ll make it harder for the bloc to take decisive action on other issues.
With the EU seeking to maintain a united front on tariffs, Chinese firms are preparing their response, planning factories inside the bloc to get around the restrictions. BYD Co., for instance, is planning its first European car factory in Hungary, rewarding Orban for years of courting Beijing. Another electric vehicle firm Chery Automobile Co., has partnered with a Spanish company there and plans to begin production later this year.
The challenge posed to the EU by China’s EV producers encapsulates some of the more fundamental dilemmas at the heart of the bloc’s dealings with Beijing.
China represents the biggest market for German car producers — the flagship industry in the EU’s biggest economy — and as such is indispensable to company profits. Yet the rapid advances of Chinese EVs threaten the future of firms such as Volkswagen AG and Mercedes-Benz Group AG, which are struggling to navigate the transition from combustion engines.
Germany’s particular vulnerability to any retribution from China creates tensions with countries like France that have been pushing for a more assertive response. That’s likely part of the Chinese calculation, analysts say, when Xi decides to embrace Meloni and Orban.
Despite Meloni’s decision to pull out of the BRI, there’s a sense in Beijing that the Italians are not among those pushing hardest for retaliation against what the Europeans say are China’s unfair subsidies. So there may be some belief that it may be possible to win over Meloni to soften the EU’s overall stance.
--With assistance from Donato Paolo Mancini.
©2024 Bloomberg L.P.