What Xi Jinping and Emmanuel Macron want from each other

Chinese leader Xi Jinping is on a state visit to France. Xi has obvious goals in meeting with French President Emmanuel Macron.

Xi’s political goal is a new world order that would supplant Pax Americana with Chinese global hegemony. He wants to cleave France from the United States. The Chinese Communist Party chairman also has an important economic agenda: forestalling European tariffs against Chinese exports and opening France and Europe more generally to the influence of Chinese technology while reducing U.S. technological superiority. 

China knows that France is declining in the global economic order. France is the world’s seventh largest economy, but the GDP of France is only equivalent to 10% of U.S. GDP and just 16% of China’s GDP. Xi knows France wants access to the Chinese economy, especially the household sector. France enjoys a global comparative advantage in agricultural goods and prestigious consumer brands such as Louis Vuitton, Chanel, and Hermes. Xi is very aware that relative to the U.S., the per capita income of France is low, about 60% of U.S. per capita income.

Unfortunately, Macron will fail to improve the long-term prospects for the French economy. There is a clear inverse relationship between economic growth and the size of government. France’s government consumes more than 50% of its GDP. France’s embrace of dirigisme and a quasi-form of socialism dooms its economy over the long term. Adding to Macron’s challenge, we now live in an age of technology and intellectual property. Notwithstanding the work of France’s DGSE intelligence service to secure related research and knowledge from Western allies covertly, France is almost completely absent from the domain of advanced technology.

Xi may persuade Macron to open the door for Chinese investment in France’s “high technology” sector. But all of the technology transfers will be one way from France to China. That is the nature of the Chinese regime. France and China will, however, cooperate in the commercial aviation industry. Because of the well-known production and quality control problems at Boeing, Airbus is rapidly gaining global share. Airbus now has production facilities in China. Xi will leverage France’s desire to promote Airbus in order to gain access to proprietary commercial aerospace technologies. Macron will trade short-term economic growth at the expense of enabling China to create a third competitor in the global aviation industry.

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That’s not to say Xi will get everything he wants. Xi’s motor vehicle export strategy will fail. France will ultimately impose steep tariffs on Chinese exports of electric vehicles. Vehicles account for over 200,000 jobs in France. Without tariffs, China would destroy both the French and also the wider European auto industry.

The obvious question for France and Macron is: Why open the door for China to expand its economic and political influence in Europe? For Macron, the Xi state visit is all about short-term economic boosts and global prestige.

James Rogan is a former U.S. foreign service officer who later worked in finance and law for 30 years. He writes a daily note.