China knocks on Europe's doors: a step towards fragmentation

Fugnoli Kairos Partners SGR: Beijing will try not to lose the European market

The summit of the SCO, the Shanghai Cooperation Organization, was held last July 4th in Kazakhstan. The Organization which, in Beijing's hopes, should become the anti-G7, and bring together the most interesting economies of those who, for their own reasons, oppose the West, ended with a new annexation. Aleksandr Lukashenko's Belarus enters the game and thus the SCO ideally arrives at the border of Europe and NATO.

In such a context, next November's result takes on even more importance. After the attack on July 13th, Donald Trump's shares seem to be on a solid rise. His victory would mean a weakening of NATO. But also an assertive attitude towards China. And this could also cause problems for Europe, which must find a way to dialogue with the Dragon.

«The American idea – explains Alessandro Fugnoli, Strategist of Kairos Partners SGR – is to put pressure on Europe with the concept 'either with us or against us'. Up to this moment, Europe has decided to stand with America. This happened with Russia. With China, however, it is different. European countries know they will have to pay a price if they break with China. And Beijing itself will do its best to keep the doors to Europe open as much as possible. If Europe, let's say, puts measures for 100, China will respond with measures for twenty. He can afford it because he knows that protectionist measures will increase internal European prices and Chinese cars cost a third of ours. If we put tariffs on Chinese electric cars because they compete with ours, European electric cars will cost three times what they would cost if we brought them from China and therefore inflation will also be higher."

Politics and economics, in short, are intertwined. Fugnoli underlines how: 'the political choice is to be with America, even if this will have a certain economic cost. All this, with an EU commission that starts out weakened and will still accept American choices on Ukraine. China, meanwhile, adopts the tactic of waiting and patience and above all keeps relations alive in what will be a strategic area in the future.

On the sidelines of the SCO summit, Chinese President Xi Jinping also made a series of visits to Central Asia, rare earth territories and Beijing knows well how important this is for the economy of the future. Then there is the constant expansion in Africa and Iran which is trying to use the alliance with China to become an energy hub at Moscow's expense. All reasons why, after an era of globalization, if Trump is reconfirmed in the White House, years of fragmentation and conflict await us.