Xi’s big adventure to keep Europe open and onside

The global economy is a very different place today than it was five years ago, when Chinese leader Xi Jinping last visited Europe.

Since 2019, a pandemic wreaked havoc, Joe Biden was sworn in as US president, Russia invaded Ukraine (which Beijing tacitly backed), German Chancellor Angela Merkel stepped aside, the US Federal Reserve carried out its most aggressive tightening cycle since the mid-1990s and the European Union (EU) is threatening new tariffs on Asia’s biggest economy’s exports.

All this leaves Xi with one of the most challenging balancing acts of his decade-plus in power. His swing through France, Serbia and Hungary comes as concerns about Beijing fueling Russia’s war machine collide with Xi’s need to tap Europe’s electric vehicle (EV) market, convince the West that Chinese “overcapacity” concerns are overdone and that China’s property crisis won’t be the cause of the next global financial crisis.

All that, while avoiding bumbling into a broader trade war with a vital economic bloc over the manufacturing surge leading China’s post-Covid recovery.

Yet there’s another notable difference over the last five years. When Xi last visited, China’s gross domestic product (GDP) was roughly the same size as the EU in US dollar terms. Today, it’s about 15% bigger.

“The cyclical positioning of Europe and China points to the trade balance tipping in China’s favor,” says Cedric Gemehl, analyst at Gavekal Dragonomics.

At the same time, though, EU region demand is showing signs of recovery, which could be a boon for China-made goods purchases.

As economist Bert Colijn at ING Bank puts it, “the eurozone economy finally showed some meaningful growth again in the first quarter of 2024 after a long period of stagnation since the