Macron's visit to China possibly changing the anchor of EU-China relations

President Macron’s first state visit to China is not only relevant for France’s economic and political agenda but also for that of Europe. Here are some key reasons.

First, Macron’s relatively negative approach to China during his campaign (in particularly his push to set up a European-level investment protection agency following the example of the Committee on Foreign Investment in the United States, i.e. CFIUS) seems to have lost ground. Although it is hard to access whether that was a useful device for Macron’s election campaign, it is sure that Macron is now fully aware of the cost of taking a harsh stance when it comes to the economic relations with China.

Second, such realization seems to have done wonders in terms of the more relevant content of the high economic dialogue between the two countries (China-France 5th High Economic Dialogue was concluded on last December 1st and clearly reached a different level in terms actionable measures).

Third, and most importantly, Xi’s VIP reception for Macron reflects very well what has been China’s increasingly successful approach to its relations with EU, namely “divide and conquer”. We just need to recall that, in the past few years, Germany was obviously China’s key strategic partner within Europe. Thanks to massive machinery and automobile exports to China, and more recently, the direct investment of Chinese companies into the high end of the Mittelstand, Germany was the biggest winner from China’s development model, both in terms of a large trade surplus. Both benefits are starting to turn sour for Germany, as China moves towards a more consumption-based economy but also substitutes imports of machinery and automobiles with its own production and even starts to compete with Germany in third markets.

While this is also true for France, Macron is clearly eyeing into a special strategic partnership with China as China’s appetite gears closer to France’s comparative advantage (such as retail and hospitality among others). In other words, Macron seems to have come to the realization that he had better be on the right side of the table under China’s divide and conquer strategy in Europe, i.e. a more accommodating stance towards China. This is especially essential when France now can benefit more from this relation.

On this basis, we should expect Macron and Xi to increase the frequency of their state visits down the road as well as bilateral exchanges to an extent that France might become China’s most relevant partner in Continental Europe.