Xi Jinping is in the City of Light during the next 48 hours as he rounds off the final leg of his European tour. He will probably notice the dark clouds looming on the horizon when it comes to Beijing’s economic model.
Later today, China’s head of state will have a tete-to-tete with French President Emmanuel Macron at the Elysee Palace in Paris.
Tomorrow, they will be joined by German Chancellor Angela Merkel and EU Commission President Jean-Claude Juncker.
But behind the scenes, the atmosphere will be distinctly different from Xi’s opening state visit to Rome last week.
China’s government-run media were euphoric after Italy became the first Group of 7 nation to sign up to his foreign policy masterplan known as the Belt and Road Initiative.
“The signing of a memorandum of understanding [with] Italy on Saturday to jointly advance the construction of the Belt and Road is a milestone not just for China but also for the world,” China Daily said in an editorial.
“It is a sign that [the BRI], which is meant to establish better connectivity for the promotion of economic globalization, has started to be accepted by developed countries.”
Global Times, which is owned by the Chinese Communist Party’s official newspaper, the People’s Daily, went even further in its gushing praise:
“President Xi Jinping’s visit to Europe has injected new impetus for expanded China-Europe cooperation. Italy [signing up to] the BRI is considered a landmark event. [Its] participation further proves the BRI’s attractiveness.
“Washington has been publicly opposing Italy’s endorsement. Some Western people said it shows US influence is declining while China’s is rising. Critics said Italy has allowed China’s influence to reach Europe.
“Some even exaggerated, saying Italy has turned itself into a ‘Trojan horse.’ These outmoded thoughts are only misleading the US and disturbing some Europeans.”
Still, concerns exist in the capitals of Europe about China’s “rising influence” on the world stage and what many believe is a lack of transparency when it comes to these new Silk Road superhighways.
In scale and depth, the initiative is immense, spanning more than 120 countries and 4.4 billion people across Asia, Africa, the Middle East and Europe in a maze of multi-trillion-dollar infrastructure projects, including a web of digital links.
Allegations of “debt traps” and the way major BRI infrastructure projects tend to be dominated by Chinese state-owned enterprises have been raised by politicians, academics and analysts.
“In a world with giants like China, Russia or our partners in the United States, we can only survive if we are united as the EU,” Heiko Maas, the minister of German Foreign Affairs, told the German newspaper Welt am Sonntag.
“And if some countries believe that they can do clever business with the Chinese, then they will be surprised when they wake up and find themselves dependent.”
But there are other issues at play here which are just as significant.
On Tuesday, Macron, Merkel and Juncker will push for greater access to the world’s second-largest economy when they sit down for talks.
A key sticking point has been Beijing’s preference for state-run domestic companies, which freeze out international competition. During the past 10 months, this has helped fuel China’s trade war with the United States.
He Weifang, a well respected if controversial law professor at Peking University, warned that Xi’s government has to start honoring commitments made when the country first joined the World Trade Organisation nearly 20 years ago.
“There is a strong correlation between current US demands in trade negotiations and the commitments that China made in 2001,” He told the South China Morning Post. “Back then, Chinese legislators were excited about the then-upcoming law changes, but ultimately nothing definite ended up happening.
“The trade war is an opportunity for China. It is not that China has to succumb to the US, but it is time for China to fulfill its solemn commitments. If there is no structural reform, China cannot sustain its economic growth and the economic downturn will fundamentally shake the legitimacy of the Communist Party’s regime,” He added.
Cooling growth has been a predictable byproduct of the trade conflict.
Another round of discussions will resume later this week in Beijing with Vice-Premier Han Zheng reiterating at the weekend that the “opening up” process would gather pace and include education, healthcare and the telecommunications sectors.
“As the next step, we will continue to shorten the negative list [industries which are off-limits for overseas companies] and allow sole proprietorship of foreign businesses in more sectors,” Han said at the China Development Forum on Sunday.
“We will [also] continue to strengthen intellectual property protection, prohibit forced technology transfers, and build a penalty and compensation system [for infringement cases],” he added, confirming promises made at the annual National People’s Congress earlier this month.
Yet as the US-Sino talks drag on with tariffs worth up to US$250 billion still in place, global markets are showing signs of a bad dose of the jitters.
On Monday, Japan’s Nikkei 225 plunged 3.01% to close at 20,977.11 points, while the Shanghai Composite Index tumbled 1.97% and Shenzhen fell 1.8%. Hong Kong’s Hang Seng index dropped 2% following a sell-off on Wall Street last week, as did South Korea’s Kospi.
Fears that the fallout from the trade war is triggering a global slowdown have left investors spooked along with disappointing data from the US.
“A deal or no-deal [over trade between Washington and Beijing] remains the only real game in town,” Jeffrey Halley, an analyst at the online trading platform Oanda in Singapore, said in a commentary.
For President Xi, shades of gray might just creep into his visit to the City of Light.