By Vina Nadjibulla

Originally published in Policy Magazine

Mark Carney’s recent trip to Saudi Arabia has aroused a fresh debate about Canada’s foreign policy, and whether this prime minister is straying too far from its longstanding international relations norms.

While this concern is understandable as a response to the speed with which developments are unfolding and the transformative change Mr. Carney is implementing, it negates the overwhelming role of context in these events.

The world is evolving faster than at any previous point in history. The answer, however, is not to retreat from engagement. Values are rarely advanced through isolation. Influence requires presence, relationships, credibility and economic leverage.

Canada’s traditional middle-power diplomacy developed within an international order underwritten by American economic and military power. The United States provided much of the security, market access and institutional leadership that allowed countries such as Canada to specialize in mediation, peacekeeping, humanitarian engagement and the promotion of international law.

That order was neither perfect nor universally accepted. But it created space for Canada to exercise influence through diplomacy and soft power without having to generate all the material capabilities that sustained the wider system.

Today, the United States is itself disrupting that order, reassessing its alliances and transforming its commercial relationships. Power is more dispersed. International institutions are weaker. Great-power rivalry is intensifying, and economic interdependence is increasingly used as an instrument of coercion and leverage.

The wider postwar order is unravelling. Pretending otherwise does not make Canada more principled. It makes us less relevant to the world as it actually exists.

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A fair reading of Mark Carney’s diplomacy — per his peripatetic travel schedule, his Davos address, his recent joint-bylined essay with Finnish President Alexander Stubb in The Economist and his public statements — shows that his response is not to abandon internationalism, human rights or the rule of law. It is to ask how Canada can continue advancing them when the power structures that once supported them are disappearing.

In their Economist essay, Carney and Stubb reject both “wishful multilateralism” and cold realpolitik in favour of what they call values-based realism: a foreign policy that remains committed to freedom, human rights, sustainability and solidarity, while recognizing that not every country with which Canada must work will share all of those values.

This is not an abandonment of the moral leadership Canada aspired to and sometimes achieved within the longstanding power arrangements of postwar multilateralism. Nor is it a reduction of Canadian foreign policy to trade promotion.

It is an effort to construct a new foreign policy framework for the world now taking shape, or, to coin a phrase, building the foreign policy while engaging in it. The prime minister is arguing that the emerging order will not be organized around one dominant power or one universal institution.

Canada’s task is to define its interests, identify the strategic capabilities it needs, and assemble the partnerships required to advance them, per his concept of “variable geometry”.

This represents a shift from a foreign policy of alignment to one of strategic autonomy and agency and potentially a more ambitious role for Canada on the world stage, not, as some have argued, a smaller one.

The Saudi visit should be understood within that larger project.

Commercial agreements were indeed central to the visit. But, as Donald Trump’s presidency has proven, foreign policy and economic policy can no longer be separated, to the extent that they ever could.

While retreating from hyper-globalization, the global economy is being reorganized around resilience, security, standards and political alignment. Supply chains have become strategic terrain, and governments are once again using industrial policy, regulation and capital to shape economic outcomes.

Energy systems, critical-mineral supply chains, artificial intelligence, data infrastructure, defence production, food security and access to capital are now sources of national power. Building relationships in these areas is not merely commercial promotion, it is economic statecraft. It is about ensuring that Canadian resources, technologies, firms and capital occupy consequential positions in the industrial ecosystems on which other countries depend.

Canada will gain leverage not simply by selling energy or critical minerals, but by helping shape the infrastructure, processing capacity, technical standards, financing arrangements and trusted supply chains surrounding them.

The objective should be to translate Canadian strengths in energy, critical minerals, artificial intelligence, quantum technology, agriculture and finance into durable relationships and greater strategic indispensability.

Seen through that lens, the presence of pension fund executives on Carney’s delegation or his focus on investment roundtables on trips around the world takes on a different meaning. In the emerging economic order, capital is not merely money seeking a return.

Deployed with strategic purpose and without compromising fiduciary obligations, it can lower risk, make essential projects viable, connect Canadian capabilities with foreign demand and help build the economic architecture of new partnerships.

Saudi Arabia has capital, energy influence, technological ambitions and significant regional weight. Canada will not agree with its government on many issues. But disagreement does not make disengagement a viable strategy. It makes calibrated engagement a necessity.

The nature of Carney’s wider NATO swing reinforced these points. In Türkiye, Canada strengthened its NATO commitments, expanded support for Ukraine, pursued new defence-industrial partnerships and advanced the Canadian-led Defence, Security and Resilience Bank, an initiative intended to mobilize capital for collective security.

These efforts combine diplomacy, institution-building, economic capacity and security policy rather than treating them as separate spheres or diplomatic silos.

Carney’s statement that lecturing countries from afar is often ineffective should not be read as an alibi for silence. Canada must continue to speak plainly about human rights, raise difficult consular cases and establish clear limits around sensitive partnerships.

Values-based realism must contain both parts of the phrase. I have made this argument in the context of Canada’s renewed engagement with China: the more extensive the engagement, the stronger the guardrails must be. The same standard should apply to Saudi Arabia and every other consequential and imperfect partner.

This is also why Carney is right to connect Canada’s strength at home with its credibility abroad. A country that cannot build infrastructure, develop its resources, commercialize its technologies, defend its territory or deliver on its international commitments will not remain influential simply because it invokes a distinguished diplomatic history.

Soft power matters. But soft power is not a substitute for capability. It is often the product of credibility, competence and contribution.

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In his critique of the Saudi Arabia trip, former Foreign Affairs Minister Lloyd Axworthy was correct in saying that Canada needs greater diplomatic capacity, deeper regional expertise, stronger humanitarian instruments and a serious commitment to conflict resolution.

Prime Minister Carney’s approach should incorporate those tools. Canada should invest in its diplomatic network and use its expanding relationships to support mediation, humanitarian access and institutional reform where it can make a meaningful contribution. But this is an argument for strengthening Canada’s emerging foreign policy approach, not for returning to the foreign policy of a quarter-century ago.

Values-based realism is a promising intellectual framework for a world in flux, but it is not yet a complete foreign-policy doctrine.

It must now be expanded, sharpened and tested. Canada needs greater clarity about the interests it must protect, the values it will not compromise, and what should happen when the two collide. It must distinguish more clearly among allies, aligned partners, transactional partners and strategic competitors. It must define the principles and guardrails that will govern engagement with countries that do not share our values so that Canadians don’t feel blindsided by that engagement when it departs from longstanding foreign policy norms and optics.

There are also harder strategic questions to answer.

Which elements of the rules-based order can still be defended through universal institutions? Which will depend on smaller, purpose-built coalitions? Where does Canada have the capabilities and credibility to lead rather than merely participate? How do we ensure that realism does not become a rationale for expediency and principle a substitute for effective action?

The responsibility of Canada’s foreign-policy community should go beyond merely endorsing or condemning Carney’s approach to helping develop and refine it: clarifying its principles, exposing its contradictions, identifying both its limitations and the capabilities needed to make it credible.

That conversation must extend beyond government to Parliament, business, to civil society, to universities and to Canadians more broadly.

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The Tour de France made its first Grand Départ from Barcelona this weekend. It began not with a chaotic dash, but with a ritual of coordinated movement: cyclists in peloton formations as precise and elegant as the Modernista architecture that lined the streets they scythed through. As the winning Team Visma demonstrated in July 4’s team time trial, disciplined drafting or slipstreaming rotates teammates through the wind, shelters leaders when they need it, and slices a path to victory. It’s the metaphor I’ve been waiting for to illustrate and rectify hedging in China-West relations.

This is Part IV in a series of articles on the wave of Western leaders visiting China since Donald Trump’s return to the White House. Read the original essay in Foreign Affairs and Part I, Part II and Part III here on Substack.

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A peloton is game theory on wheels. Every rider wants to shelter inside it to spare energy. Nobody wants to take too much wind, but some riders must. What holds it together is repeated interaction and total visibility on who’s working and who’s free-riding. The group disciplines defectors by refusing to shield them in turn. It’s cooperation without central authority — stable until the moment it isn’t. An effective peloton requires riding like a team, forming a paceline and taking turns in the wind. Otherwise it’s an amorphous mess. The essence is energy allocation.

The wave of diplomatic visits to China has been the same. Look at each trip as a discrete verdict on bilateral relations and you miss the pattern of pack behaviour under collective exposure. Nobody wants to be the first or only one to take a leading position that risks windburn, either from Trump’s gusting crosswinds of tariffs and transactional threats, or from the PRC’s steadier headwinds of diplomatic intimidation, market access restrictions and supply chain chokeholds.

The peloton’s rotation problem is central to the metaphor: under a steady US alliance system, it’s sustainable. Under Trumpian volatility, it becomes more dangerous because the lead rider is no longer reliably pulling — and lately he may even be swerving into you. When the group can’t fully institutionalize reciprocity and enforcement, individual riders are tempted to try their luck with selective bilateral stabilization. They try to appear to be cooperating with their Western partners, while quietly looking for ways to reduce the risk they personally become the next test case for coercion. Look closely and you’ll see them smoothing dialogue with Beijing, finding transactional off-ramps, and avoiding public escalations.

Staying in the peloton saves enormous energy, which means that normally, leaving it is stupid — except at strategic moments. Tactical wheel-sucking behind another cyclist to reduce wind resistance is rational. In alliance politics, it’s also rational — and corrosive. The EU’s currently wheel-sucking at the bloc level: everyone stays in the pack but no one wants to take a long pull for stronger trade defence measures. Friedrich Merz’s February visit looked like Germany taking a short pull — with the team car shouting contradictory instructions and half the domestiques (German companies) riding for Team China.

Naming PRC coercion, interference, espionage, hostage diplomacy, and hostile policies on Tibet, Xinjiang, Hong Kong, Taiwan, Japan, and the Philippines burns a match in cycling parlance. It creates immediate retaliation risk, complicates deliverables, and can even look performative if you don’t have capacity and will to impose meaningful costs. So politicians draft like riders, hedging by tucking into a slipstream of convergent scripts with fuzzy concepts like “strategic stability,” “guardrails,” and “de-risking, not decoupling,” accepting the Chinese Communist Party’s script and choreography, and foregrounding economic deliverables for their voters.

Cycling puts buck-passing in colourful spandex and makes it more obvious, but the dynamics are much like governments letting Washington and the European Commission absorb China’s retaliation while preserving market access to placate farmers. Energizing for each rider; poison for the peloton, because if enough riders do it, the breakaways start determining de facto policy.

The leaders have moved in a wave because they’re marking their rivals — watching how other visits go. Their thinking is, “if another country wins access or tariff relief and I don’t follow, I’ll be the one caught in the gutter when the next gust hits, or left exposed by a deal Trump and Xi cut over my head.” The CCP is content to allow some controlled breakaways, because every visitor who bargains alone converts a shared problem into a separate negotiation and thins the group’s collective leverage. Split the pack in the crosswind (that’s what a wedge strategy is for) and you set the tempo.

But politicians aren’t bound by physics like cyclists. With time and effort, they can change the geopolitical aerodynamics by diversifying supply chains, building domestic capacity, and hardening anti-coercion tools. That’s the long, hard road that gets you back to genuine sovereignty and better leverage. In the meantime, effective diplomacy can buy time, hold the line, and eke out small advantages.

Peloton diplomacy requires disciplined visits

Coordinate your China policies and messages with allies before you travel, hold to common red lines, and collectively impose costs on PRC coercion rather than capitulating to it individually. Call it peloton diplomacy.

When he arrived in Beijing in May, Trump could have put that logic into practice. He could have rejected the Party-state’s stagecraft and slogans, refused ephemeral deals that disadvantage allies and deepen dependence, and used meetings to bolster deterrence and apply leverage rather than seeking illusory adulation. That would have diminished General Secretary Xi Jinping’s confidence that Chinese coercion inculcates accommodation, and strengthened Trump’s own hand by establishing a new pattern in which PRC pressure on one is met with resilient pushback from many.

He didn’t. Still, as they prepare for subsequent meetings, his and other governments could refocus on the limited collective action challenge of turning each meeting with Party-state officials into an opportunity to demonstrate more resolute alignment on positions and interests they already share.

1. Reframe the purpose of going to China. Move away from the self-censorship, ephemeral dealmaking and authoritarian choreography that cedes the advantage to the CCP, and toward a playbook of using such encounters primarily to gather information, test intentions, develop strategic empathy, defend bottom lines, and convey consistent messages on allied priorities.

2. Correct the misperception that drives buck-passing. As Part III showed, Emmanuel Macron’s “matter of life and death” is the template. Until enough Western leaders share the perception that another year of accommodation does more damage than a year of coordinated constrainment, buck-passing will continue to be each leader’s rational choice. Build the perception that Chinese economic statecraft can’t be consummated against any one ally in isolation.

3. Build the contingency element that superficial hedging currently lacks. Hedging without contingency planning is just commercial engagement with extra steps. The institutional architecture Mark Carney sketched at Davos — such as EU-CPTPP links, anti-coercion mechanisms, and critical-minerals coalitions — is exactly the institutionalism of Robert Keohane’s After Hegemony: cooperation maintained without a reliable American hegemon. It’s buildable, and it doesn’t require everyone to agree the threat is existential. It requires strong enough diplomatic agreements and commitments that nobody can be picked off alone.

4. Refuse the script even when accepting the protocol. Macron in Chengdu is the operational proof that this is possible. Take the panda lunch. Sign the letters of intent. And still say, on Chinese soil and at home afterward, what is actually true about the imbalances, the war in Ukraine, and the threat to European industry. The visit costs are sunk. The narrative costs are not. More on this below.

How to flip the CCP’s script

Let’s dig into #4 as an example. My Foreign Affairs essay calls on visiting leaders to “eschew the symbolic, rhetorical, and material accommodation that Beijing seeks.” Diplomats might fairly respond: Okay, but how, exactly? The visiting leader cannot refuse another host government’s protocol. They have to walk the red carpet, attend the banquet, sit at the long table opposite Xi. They cannot dictate the venue, the ceremonies, the seating arrangements, or the simultaneous interpretation of a state visit they themselves requested.

True. But there’s a useful distinction between protocol — what every state visit in the world entails — and optics and narrative, which are what the Party really wants to control, and which visiting leaders typically surrender. The first is unavoidable. The second is what matters. Stoicism teaches us to focus on what’s within our sphere of control, and stop worrying about what’s not.

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Outside the visitor’s control

Protocol: motorcades, honour guards, joint photo opportunities, hosted state banquets, simultaneous interpretation, seating arrangements determined by the host. Refusing any of this would be futile, rude, or both.

Within the visitor’s control

The composition of the delegation. Bringing a business delegation of 30 CEOs to China is itself a public statement. The CCP understands that those business leaders won’t pressure their political representative to engage in tough talk. They’re there to constrain and manage imminent risks and to seek new opportunities. Without the structural discipline of national and allied China strategies, CEOs’ short-term commercial logic dominates, even as decisions to locate research and development and production in China erode their home countries’ economic security. By contrast, it would send a very different signal to send a delegation that includes ministers responsible for human rights, defence, security, or intelligence, as well as technical experts, China specialists, civil society advocates, and labour union leaders.

Pre- and post-visit framing. What delegations say before boarding their planes and after returning is entirely under their control. “The meeting is the deliverable” was a phrase I heard too often from diplomats during my research. It made my head hurt, because that’s exactly the dynamic the CCP is working to create. In a market where demand for face time with Xi Jinping now exceeds supply, the Party is raising the price. It’s a classic Chinese tactic: use access for leverage and oblige you to make concessions just to get in the door. Diplomatic friends, that’s a sucker’s game, and you’ve got to stop playing it.

Repeat after me: The meeting is not the deliverable. Both sides should have an interest in meeting, and if you make concessions before negotiations even start, you’re only weakening your own hand. The Party strives to inculcate subservience, but don’t ever confuse that with mutual respect. Play your diplomatic cards well and insist on a dynamic of sovereign equals. Chinese officials might actually respect you.

Demeanour. Less affective warmth on camera. Fewer ad-lib smiles. Fewer lines that sound like gratitude or admiration. Instead, cultivate firm professionalism. Richard Solomon’s classic RAND paper, Chinese Political Negotiating Behavior, warned readers to expect that their hosts would “manage the ambience so as to maximize the sense of gratitude, dependence, awe, and helplessness.” It concluded: “resist the flattery.” That advice remains timeless. Leave your ego on your plane with your electronics.

The language of the joint communiqué. Beijing routinely tries to insert specific formulations into the public documents emanating from the visits. They include terms such as comprehensive strategic partnership, an equal and orderly multipolar world, the right side of history, reaffirmation of the CCP’s hardline one-China principle on Taiwan (rather than the “one-China policy” of most Western governments), and rejecting decoupling or a Cold War mentality. Negotiating the joint statement text rigorously in advance — and refusing accommodative language even when that means accepting separate parallel statements — is squarely within the visiting government’s power. So is subsequently disavowing any language in the PRC’s statement you don’t accept.

The leader’s own public remarks. What’s said in the recorded parts of meetings, the press conference, the business forum, or the academic address is entirely in the visitor’s control. Carney’s Orwellian “new world order” line at his appearance with Premier Li Qiang was not a protocol requirement. Same with Keir Starmer’s mealy-mouthed “more sophisticated relationship” formulation days after Jimmy Lai’s appalling sentencing. Pedro Sánchez didn’t have to endorse the “Four Global Initiatives” to sell pig stomachs. They were choices that provided free content for PRC propagandists.

Symbolic concessions Beijing extracts as preconditions. Approval of a contentious mega-embassy on the eve of the visit; the dropping of a pending counterintelligence prosecution; the granting of high-profile commercial approvals timed to the trip; state honours offered to Chinese officials whose conduct should disqualify them. These are sometimes presented as protocol but are actually substantive concessions made to secure the meeting itself.

From cycling to diplomacy

Getting the diplomacy right doesn’t substitute for material policy changes and the hard work of building national power any more than adroit peloton tactics substitute for a cyclist’s aerobic capacity or power-to-weight ratio. But for political signalling and shaping the strategic narrative, high-level diplomacy matters. Walk the red carpet but refuse the language of the joint statement. Sit at the banquet but use the press appearance to name detained citizens. Accept the toast but reject the slogan. That’s what disciplined engagement looks like. It’s tougher to pull off than it sounds. It’s also entirely possible.

As Canadian former foreign minister recently wrote:

Sovereignty lives in small moments. When an ambassador oversteps and you push back. When an ally bullies and you say no. When a trading partner interferes and you name it. When a friendly autocracy fuels atrocities and expects your silence, and you refuse to provide it.

It’s not too late for the Trump administration and others to course-correct. What American officials and other statesmen say and do over the coming months can redefine in retrospect what all these visits have been about. It’ll be more effective when coordinated with likeminded capitals.

All these countries risk bullying, humiliation and loss of sovereignty when facing Beijing alone. But there’s a better way, as the Tour de France’s cyclists demonstrated this past weekend in Barcelona. The team that won the first yellow jersey moved as a unit — taking turns in the wind, protecting its leader, and preserving power for the climb. Here’s the upside for self-interested pragmatists: like efficient cycling, if you get the diplomacy right you’ll expend less energy for the same results. It’s not the strongest cyclist that automatically wins the Tour. It’s usually the best rider with an effective team and strategy.

There’s a long road ahead. You’re constrained by finite resources, incomplete information and uncertain terrain. Most interactions oblige restraint. A few challenges require total commitment. Wisdom is knowing the difference. Time to pedal hard and restore the peloton.

“It will not be any European statesman who will unite Europe,” Charles de Gaulle once said. “Europe will be united by the Chinese.”

France’s current president has been working overtime to prove his predecessor right. For months now, Emmanuel Macron has been trying to shift the other 26 members of the European Union to adopt more robust collective responses to China’s existential geoeconomic threat. This month he got closer than ever, only to have Germany and Spain slow progress yet again due to fear of Beijing’s retaliation.

Efforts to balance China got off to a good start last week: France hosted a G7 Summit that launched a Critical Minerals Resilience and Production Alliance and set a target to cut dependence on any single non-G7 supplier of rare earths and permanent magnets below 60% by 2030. China wasn’t named, but everyone in the room knew which supplier they were talking about. The alliance effort will be backed by €64 billion in newly-announced projects. Donald Trump also seemed more willing to work with the EU to support Ukraine.

Then, as the June 18–19 European Council meeting of EU national leaders approached, there appeared to be a shift in the EU consensus: Germany, Poland, the Netherlands and Belgium lined up behind France’s proposal for a new trade-defence instrument — a European answer to Washington’s Section 301 — that would let the bloc impose tariffs quickly when one country’s dominance of imports (again, the unnameable China) starts to threaten economic security.

Machines of shoving space

China has become addicted to exporting the huge manufacturing surplus its unbalanced state capitalist economic policies generate. This has created a Second China Shock with a tsunami of cheap goods that’s rapidly eroding the West’s advanced industries. With Trump’s elevated tariffs deflecting a sizeable share of that trade away from the United States, Europe has become China’s market of last resort, which is putting crucial manufacturers there in jeopardy. Last year every EU member state ran a trade deficit with China for the first time, with the total EU-China deficit hitting €359 billion (yep, about a billion euros a day) — roughly double the pre-pandemic figure. China’s exports to the EU are up another 16% in the first half of this year. The Economist notes that bankruptcies are running at levels last seen in 2015. Germany, the industrial heartland, shed 143,000 manufacturing jobs last year. MERICS has a grim festival of new charts:

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Compounding the problem for European leaders is that the Chinese Communist Party has demonstrated willingness to mete out punishment against countries that impose trade and investment barriers or otherwise frustrate its ambitions. It has a track record of weaponizing access to China’s market, squeezing dependent firms to influence government policy, and using control of supply chains for coercion. That’s why at the European Council meeting, the session in which leaders debated the threat was billed as focusing euphemistically on “global macroeconomic imbalances.” One is reminded of the dictum of another French statesman, Talleyrand: speech was given to man to disguise his thoughts.

Common threat vs. divergent tactics
= incoherent response

The second China Shock and second Trump Shock are the geoeconomic backdrop for the wave of Western leaders visiting China since early 2025. Read the Foreign Affairs essay where I began the analysis and Part I and Part II where I explained that these governments are trying to hedge an unreliable Washington by repairing ties with Beijing — in the process signalling accommodation of PRC power and interests.

When we apply the international relations typologies from Part II to the wave, here’s the composite picture: Paul Schroeder catches the dominant mix of bandwagoning (with Beijing) and hiding, plus Mark Carney’s rhetorical transcending. Tom Christensen and Jack Snyder supply the engine — a shared misperception that defence is dominant against Chinese economic statecraft, which results in buck-passing that pretends to be less-embarrassing hedging. Randall Schweller’s “jackal bandwagoning” catches the cases that aren’t hedging at all but rather offensive profit-seeking in a system those leaders perceive as tilting toward China. Glenn Snyder’s entrapment–abandonment dilemma explains why Trump has made bilateral Beijing channels look like prudent insurance even as they add up to collective weakness. And Fabio Figiaconi’s contingency test exposes how little of 2025–2026’s diplomacy qualifies as effective hedging, given the lack of any real institutional fallback.

States facing a rising threat decline to confront it and instead hope somebody else will bear the burden of doing so. For the EU, each member would be better off if the bloc collectively balanced against Beijing. But for any single government, the smart move, given that the others are hanging back, is also to hang back: let the U.S. and the European Commission absorb the retaliation, lost market access, protesting farmers, and lobbying CEOs. Since that logic holds for all 27 simultaneously, nobody moves first, and inaction becomes the stable resting point.

Let’s apply the composite framework to each visit (in the order they travelled):

• New Zealand — Hiding, drifting toward buck-passing.

• Australia — Bandwagoning on economics, balancing on security — a genuine hedge.

• Portugal — Bandwagoning with elements of specializing.

• Slovakia — Jackal bandwagoning.

• Ireland — Buck-passing masked as hiding.

• Finland — Hiding on China while balancing on Russia.

• South Korea — Shifting from balancing toward bandwagoning for profit.

• Canada — Transcending in doctrine, buck-passing in conduct.

• United Kingdom — Hiding from trade-offs, drifting toward bandwagoning.

• Germany — Balancing in rhetoric, bandwagoning in substance.

• Spain — Bandwagoning for profit, fused with buck-passing.

Thus, the wave of visits has been formed by buck-passing equilibria reinforcing each other, with plenty of encouragement from Beijing’s strategists. The aggregate effect has been to dissipate the West’s collective leverage, because leaders can’t agree on what they’re trying to do, much less how to do it together. Don’t any of these guys know how to balance?

Astute readers will notice one leader missing from the above list: Emmanuel Macron, whose fourth state visit to China in December 2025 came closest to balancing and showcased both the limits of engagement and the possibility of disciplined post-visit conduct. Examining in retrospect what he did differently illuminates the dynamics of the current phase of the geoeconomic struggle between the CCP and the West.

Macron strikes a balance

The French president’s trip was conventional in form, with nearly 40 CEOs in tow, ten sectors identified for “crossed investments,” and letters of intent signed. He accepted the Party-state’s full choreography, including a rare courtesy escort by Xi Jinping to Sichuan, a ping-pong photo-op, and Brigitte Macron at the panda centre. As Le Monde’s Harold Thibault drily observed, the Macrons “willingly indulged in two classics of Chinese diplomacy — at the cost of entering a game where Beijing holds the cards.” A French diplomat quoted by Le Point on the eve of the visit grumbled that “we have the feeling of being a simple variable of adjustment in the Sino-American relationship.”

Macron returned with no Airbus order — a 500-aircraft package had been on the table for months but Beijing held it back, with French analysts correctly inferring it would be kept in reserve for leverage in trade negotiations with Trump — and no relief on European brandy or pork. But France’s president did some things differently both on Chinese soil and at home after. The Élysée said the goal “wasn’t to stack contracts, but to do politics — that is, to deliver messages.” A presidential adviser framed the substantive ambition more precisely: to “clarify the rules of the game” directly with the CCP’s General Secretary.

In Beijing, standing beside Xi at the joint press appearance, Macron warned of the risk of “disintegration of the international order.” He told Xi that such global trade imbalances “are not sustainable — they carry the risk of triggering a financial crisis.” Macron also pressed Xi to rein in Vladimir Putin’s illegal invasion of Ukraine. The Chinese leader bluntly refused. Publicly, Xi rejected “any irresponsible and discriminatory accusations” and, in a sharper register, told Macron to “stand on the right side of history.” That’s Party-speak for “we’re now powerful enough we can ignore your lectures.” French readouts say that privately, Xi claimed China lacked the means to push his fellow autocrat toward a ceasefire — dubious, given that NATO considers the PRC the “decisive enabler” of the war.

None of those were concessions. But Macron did extract clarity, and that has utility: it makes the Chinese position legible in a way the usual fog of “constructive role” boilerplate doesn’t.

The clarity matters all the more because the substantive picture had grown sharper just before the visit. Ukrainian intelligence said Chinese Yaogan reconnaissance satellites had overflown western Ukraine during a major Russian barrage in October 2025, with their data passed to Russia for targeting strikes inside Ukraine. We now know that around the time of the French state visit, China was training Russian troops that were then sent to Ukraine. The “neutrality” Xi continues to invoke is a fiction Macron rightly declined to dignify.

Then in Chengdu, standing at a podium at Sichuan University in front of Chinese state media the day before flying home, Macron urged Chinese students not to “yield to divisions” and autarky. He named and rejected the framing Beijing has spent years cultivating: “Many people will explain to you that Europe is old, arrogant, rich, and despises the Global South. But all of that — these are inventions, theories.” And then a line that shouldn’t have been deliverable in that room: “One is only free if one is free to know oneself. Academic freedom must be cherished, the freedom of teaching and research… let us not yield to the sirens of prohibition.” He told Chinese students to read Alexandre Dumas and Victor Hugo, even as their universities grow ever more controlled and censored. This was a Western leader using a CCP-controlled platform to contradict three of its central narratives. It’s rare.

While Macron was in Beijing, the Party-state dispatched a Xinjiang delegation to Paris to spin a “return to normal” in the Uyghur region — the kind of choreography that usually works, but that Macron’s Chengdu speech ran directly against.

Then came the post-visit escalation. In an interview with Les Echos, Macron said the quiet part out loud. He described China as “striking at the heart of the European industrial and innovation model” and said Europe was “caught between” Trump’s tariffs and Chinese overcapacity — “a matter of life and death for European industry. We have become the adjustment market.” He said he told Xi that without movement on the surplus, “we Europeans would be forced, in the very next months, to take strong measures and to de-cooperate, like the United States, for example tariffs on Chinese products.” He then amplified those French-language messages in a Financial Times op-ed: “Protection against unfair competition is the foundation of resilience… We must not be naive: a credible protection strategy requires that we have the means to defend ourselves against those who break the rules.”

Shifting Europe from dithering to defending

Macron has a crucial institutional ally in European Commission President Ursula von der Leyen. Trade is an exclusive EU competence, so the tough calls on China fall to the Commission, which also makes it the buck-catcher of choice for member states. At the EU-China summit in July 2025 — shortened to a day at China’s request — she told Xi to his face that the relationship had hit “a clear inflection point” and that trade “must become more balanced.” To his credit, Macron noted he had coordinated his messages in Bejing and after with Von der Leyen, who Chinese officials have been trying to sideline.

EU timing has reinforced Macron’s framing of the China challenge. The day he arrived in Beijing, the Commission published its new economic security doctrine. The week after he left, Brussels released the positive arm of its “Made in Europe” Industrial Accelerator Act, including local manufacturing quotas for foreign investment designed to prevent “screwdriver factories.” Macron’s post-visit tone slotted into that institutional rhythm rather than against it.

It’s an indicator of how far Europe-China relations have deteriorated that Macron himself has shifted to this stance. Back in 2024, Member of the European Parliament Raphaël Glucksmann penned a prosecutorial open letter on Macron’s previous seven years of engaging China, asking: “what have you obtained from your accommodation strategy? Nothing but symbolic homages flattering your pride.” That still stings. France’s bilateral deficit with China has nearly doubled over the decade of Macron’s presidency, to €47 billion, accounting for nearly half of France’s total trade deficit. “For China, France today appears as a ‘has been’ country,” wrote Emmanuel Lincot in Le Figaro the day Xi met Macron.

While he’s a recent convert to the firmer response that European China analysts and the Commission have been pushing for years, Macron’s post-visit performance nonetheless helpfully shows the prescription is operationally possible. A leader can accept the protocol and still refuse the script — take the panda lunch and the ping-pong photo, still tell Chinese students to cherish academic freedom, then warn that tariffs are coming if nothing changes.

That makes Macron the only European national leader who’s tried to convert hedging into balancing at the collective level. As his predecessor De Gaulle said, “deliberation is the work of many men. Action, of one alone.” But Macron alone lacks the power to balance China, so his viable action is coalition entrepreneurship: to manufacture balance out of 27 reluctant hedgers, with France, the European Commission and likeminded states as agenda-setters. His objectives, in ascending ambition, are to:

1. reframe China as a systemic rebalancing challenge;

2. re-tool the EU with fast-acting, more potent defensive instruments;

3. protect vulnerable French sectors that are typically first to taste PRC retaliation; and

4. ultimately use China as a lever to push forward European strategic autonomy.

Escape from a buck-passing equilibrium requires changing the perception that produces it. If Europe can absorb the costs of accommodation indefinitely, buck-passing is rational; if the threat is urgent and existential, balancing becomes the bitter pill everyone’s got to swallow. The cognitive preconditioning that the Commission, Macron and transatlantic China hands have been working on for years has finally yielded a unanimous diagnosis. As ECFR’s Andrew Small framed it before this month’s Brussels summit, the question for leaders is no longer whether China is a systemic challenge, but whether Europe will act at the scale and speed the threat demands.

With nobody at the European Council table last week still arguing the trade imbalance is benign, perceptions have flipped toward offence-dominance — the necessary condition for balancing. But the collective-action problem that produces buck-passing remains unsolved. And Macron may lack the power to finish the job: he’s running European grand strategy from domestic survival mode, his ideas outrunning his authority, with a plausibly hostile National Rally (Rassemblement national) succession raising uncertainty over whether the strategic autonomy project will survive him.

What to do? A future article will dive into the details. For now, to illuminate the path, let us return to De Gaulle:

“Always choose the hardest way, on it you will not find opponents.”

With the assistance of Patricia Xavier and Joseph Widacki.

For more on the brewing EU-China storm, read Noah Barkin:

Watching China in Europe

Germany is wavering on China (again)

Days before EU leaders gather in Brussels to discuss more forceful trade measures against China, the German government is wavering on key elements of the European Commission’s plans, including the use of safeguards to protect struggling European industries from unfair Chinese competition. German Chancellor Friedrich Merz appeared to signal his support for a tougher approach with China…

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a month ago · 26 likes · Noah Barkin

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A guest post by Vina Nadjibulla, Vice-President of Research & Strategy at the Asia Pacific Foundation of Canada. Originally published in Policy Magazine.

The first year of Prime Minister Mark Carney’s leadership has had a transformational impact on both Canada’s foreign policy and its standing in the world. The shift has been especially evident in the Indo-Pacific, where Ottawa is more active, more strategic, and more ambitious than it has ever been.

But to understand what is driving this change, it is necessary to start not in Asia, but with Carney’s reading of the United States.

The central premise of his foreign policy is that Canada is not simply managing another difficult period in the bilateral relationship with Washington. In Carney’s view, most notably stated in Davos on January 20, Canada is confronting a deeper rupture caused by changes in the United States itself.

Under Donald Trump, the U.S. has become more illiberal at home and more predatory abroad. Canada’s deep integration with the U.S. was a source of strength when Washington was the principal anchor of a liberal, rules-based order. That integration looks much more like a strategic vulnerability when the U.S. begins to behave like a predatory hegemon.

From this starting point, Carney has reframed Canadian foreign policy around two overriding objectives: economic survival and sovereignty.

The result is a foreign policy that is more pragmatic, more economically focused, and more explicitly tied to questions of national resilience. Carney has little interest in “megaphone diplomacy” and rarely foregrounds democracy promotion, human rights, or values-based framing in his external engagement. That is a notable departure from his predecessor.

Carney’s approach is not values-free, but it is unmistakably interest-led. It is also ambitious. Carney’s targets to double Canada’s non-U.S. trade and attract $1 trillion in new investment over the next decade are demanding — but also revealing. They underscore how he sees foreign policy: not as a separate diplomatic sphere, but as an instrument of economic resilience and national renewal.

Major projects, critical minerals, defence industrial policy, energy strategy, artificial intelligence, and quantum are no longer adjacent to foreign policy; they are increasingly part of it.

The Indo-Pacific Moves to the Centre

In the first months of Carney’s tenure, some wondered whether the Indo-Pacific would receive the same level of attention, especially because Canada’s Indo-Pacific Strategy had been launched by the previous government and still carried some of that political association.

Those doubts have now been put to rest. Over the past nine months, the Indo-Pacific has become central to Carney’s broader effort to diversify Canada’s partnerships and reduce over-reliance on the U.S. The Prime Minister has travelled repeatedly to the region, with consequential visits to China, India, Japan, Australia, Singapore, and South Korea.

He has also used Canada’s own diplomatic platforms to bring the region closer. He invited leaders from India, Australia, and South Korea as special guests to the 2025 G7 Leaders’ Summit in Kananaskis. He hosted Indonesia’s president in Ottawa and signed the Canada-Indonesia Comprehensive Economic Partnership Agreement, alongside new defence cooperation memoranda.

Through these efforts, Carney has focused on three related objectives: resetting relations with India, recalibrating relations with China, and deepening strategic partnerships with Japan, Australia, South Korea, and key Southeast Asian states.

The clearest achievement has been India. Carney moved quickly to reset one of Canada’s most damaged bilateral relationships. His March 2026 visit to India pushed that effort further, producing new agreements and a commitment to finalize a Comprehensive Economic Partnership Agreement by the end of the year. This reset makes strategic sense. India offers scale, growth, geopolitical weight, and major opportunities in energy, agriculture, digital infrastructure, education, and emerging technologies.

Carney has also elevated ties with Japan and Australia in ways that are strategically sound. These are trusted Indo-Pacific partners with whom Canada can deepen both economic and security cooperation. His March tour produced a new Comprehensive Strategic Partnership with Japan and reinforced the trend toward closer defence, critical minerals, energy, cyber, and technology cooperation with both Tokyo and Canberra.

Canada needs anchor partners in the Indo-Pacific where interests, trust, and political alignment are relatively strong. Japan and Australia fit that description.

More broadly, Carney has benefited from — and built on — a stronger Canadian presence in the region. Canada is now more visible, more plugged into regional networks, and more active across the Indo-Pacific than it has ever been.

The groundwork laid by Canada’s Indo-Pacific Strategy — expanded diplomatic staffing, new trade and financing offices, Team Canada trade missions, the ASEAN strategic partnership, and sustained naval deployments — has given Carney’s government a stronger platform from which to operate.

Carney’s contribution has been to invest political capital in the region and give these efforts a more coherent strategic rationale tied to resilience, diversification, and harder-edged partnership building. The result is that Canada now looks more serious in the Indo-Pacific than ever before.

Canada’s engagement in the region has also benefited from an enhanced international profile. Carney’s Davos speech, and the ideas underpinning it, have resonated deeply from Delhi to Jakarta. Across the region, Canada is increasingly seen as a constructive and pragmatic partner — one that is willing to engage across geopolitical divides while remaining anchored in its own interests.

Initiatives such as linking the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) with the Canada–EU Comprehensive Economic and Trade Agreement (CETA) reflect an effort to think beyond traditional regional silos and shape emerging economic architectures.

From Momentum to Delivery

Carney’s first year has produced real momentum. But momentum in foreign policy is fleeting. The real test now is implementation.

The first challenge is execution. Agreements signed during high-level visits must translate into concrete outcomes: market access, investment flows, joint projects, and sustained institutional cooperation. Canada has historically struggled with follow-through in the Indo-Pacific.

The second challenge is China. Carney’s recalibration of relations with Beijing has strategic logic. In an era of overdependence on the United States, Canada needs room to stabilize its relationship with China, especially in selective areas such as agriculture, energy, climate, and other economic sectors where engagement can serve Canadian interests.

But the test of this policy is whether the guardrails Carney has promised are actually put in place, understood across government, and enforced. Canada will need to show that it can deepen engagement while still upholding Canadian law, protecting against foreign interference, guarding against forced labour, screening investment in sensitive sectors, and defending its economic and national security interests.

Selective engagement with China with clear guardrails is conceptually sound. Operationally, it is complex. It requires clear definitions of what is in and out of scope, robust enforcement of investment and security frameworks, and sustained coordination across departments.

India presents the third challenge. The diplomatic reset has created political space, but the relationship remains fragile. Public opinion in Canada is still shaped by concerns related to foreign interference, diaspora tensions, and the Khalistan issue. Canadians may support re-engagement in principle, but many still lack a clear understanding of its strategic rationale.

That gap matters. A successful India strategy cannot rest only on leader-level diplomacy. It requires a deeper investment in knowledge, networks, and institutional capacity across government, business, academia, and civil society. Canada needs more India competence if it is to turn the current opening into a durable partnership.

The fourth challenge is sustaining momentum with key partners.

Relations with Japan and Australia have finally reached a level of strategic alignment that reflects their importance. But these partnerships require sustained attention, resources, and institutional follow-through.

That should include a more serious Indo-Pacific dimension in Canada’s Defence Industrial Strategy. It makes little sense for Canada to talk about stronger defence partnerships in the Indo-Pacific while concentrating industrial cooperation almost exclusively on NATO partners. If Ottawa is serious about strategic diversification, its defence industrial vision must reflect that.

Finally, Ottawa must address an important economic blind spot. Much of Canada’s Indo-Pacific engagement has focused on expanding markets for energy, agriculture, and other goods. These are essential. But they are only part of the story.

The fastest-growing segments of trade in the region are in services, digital infrastructure, and talent mobility. Education, in particular, is a strategic asset. It underpins people-to-people ties, supports innovation ecosystems, and feeds long-term economic relationships. Yet recent policy changes and the lack of alignment between immigration, education, and trade objectives risk undermining this advantage.

A more integrated approach — linking talent strategy to trade, innovation, and regional engagement — will be essential if Canada is to compete effectively in the Indo-Pacific.

The Challenge Ahead

Delivering on Carney’s ambitious, integrated agenda will require not just new policies, but a step change in Canada’s statecraft capacity in the Indo-Pacific. It will require new ways of working across governments and with the private sector, clearer priorities, stronger coordination, and a greater willingness to measure results not by meetings held or agreements announced, but by outcomes delivered.

Canada enters Carney’s second year in office with a stronger position in the Indo-Pacific than it has ever had. The foundations are in place: increased political attention, expanded partnerships, and a clearer strategic rationale.

But those foundations will only matter if Canada can build the institutional muscle to sustain engagement, follow through on commitments, and turn diplomatic openings into strategic results.

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Chinese State Councillor and Foreign Minister Wang Yi’s visit to Canada this week is significant. It is the first bilateral visit to Canada by a Chinese foreign minister since June 2016, and the most visible sign yet that the thaw in Canada-China relations that began with Prime Minister Mark Carney’s January visit to Beijing is moving into a more consequential implementation phase.

Guest post by Vina Nadjibulla

If Carney’s trip to Beijing marked the turning point—with the announcement of a new Canada-China Strategic Partnership and the political decision to reopen channels of engagement—Wang’s visit is about what comes next.

It is where broad language about pragmatic engagement must begin to translate into sectoral choices, difficult trade-offs, and specific guardrails to ensure that engagement with China advances Canadian interests without compromising Canada’s national security, economic security, or democratic values.

That is why the visit matters. It is not simply a sign that relations are improving. It is a test of whether Canada can manage a more active relationship with China without slipping into quiet accommodation or political deference to Beijing’s agenda.

Carney’s January visit framed China as part of Canada’s diversification agenda and suggested that Ottawa now sees the relationship as one element of a broader effort to build a more resilient Canadian economy and a more independent foreign policy.

But that opening also raises harder questions. Which sectors are truly open to deeper engagement with China? What guardrails have been put in place? What does a “clear-eyed” approach to China mean in practice? Who decides where the lines are drawn? And how much of this will be made public?

Trade

The first area to watch is trade implementation. In January, Canada and China reached a provisional understanding on the two most politically charged irritants in the relationship: China’s retaliatory tariffs on Canadian agricultural and seafood exports, and Canada’s tariffs on Chinese electric vehicles.

The arrangement provided some relief on canola, seafood, peas, and related agri-food products, while creating limited space for Chinese EVs to enter the Canadian market under a quota system.

There is no major new announcement on this file expected during Wang’s visit. The more realistic objective is to show that officials on both sides are working through the details and that the trade mechanisms created in January are functioning.

At some point, the agreement will have to be extended or replaced. The canola relief is time-limited and set to expire at the end of the year, while the EV provisions run on a longer timeline. That makes the current arrangement useful but fragile.

The EV side is particularly complicated. Beijing would like to see more movement from Canada, including a clearer path for Chinese EV production in Canada. But Ottawa’s room for manoeuvre is constrained by the upcoming CUSMA review, the integrated nature of the North American auto sector, and continued U.S. opposition to Chinese EVs entering the North American market.

Some observers had hoped the recent Xi-Trump summit might produce a signal that Washington was open to co-operation with China’s EV sector, or at least some easing of its position.

That did not happen. Instead, there remains clear bipartisan and industry opposition in the United States, rooted not only in trade concerns but also in a broader view that Chinese industrial policy, overcapacity, data risks, and supply-chain dominance pose strategic challenges.

That is why batteries and adjacent clean-energy supply chains may be the more important signal to watch during Wang Yi’s visit. Canada may not be ready to go much further on Chinese EVs, but there could be scope for discussion around battery technology, grid storage, renewable energy components, and other parts of the clean-energy ecosystem.

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Pragmatism and Principles

Pragmatism without principles can become accommodation. Principles without pragmatism can become posturing. Canada needs both.

The question is whether these conversations can be structured in ways that serve Canadian industrial interests without weakening Canada’s position in North America or deepening strategic dependence on China.

This does not mean Canada should outsource its China policy to Washington. But it does mean that any further opening to Chinese EVs, batteries, or related investment must be assessed through the lens of Canada’s North American economic interests as well as its bilateral interests with China.

Investment

The second area to watch is investment. Prime Minister Carney has set an ambitious agenda to mobilize massive new investment in Canada and position the country as a more serious energy, critical minerals, and clean technology player. China has capital, technology, and industrial capacity in many of these areas.

Carney’s January visit to Beijing explicitly pointed to opportunities for Chinese investment in clean energy, batteries, solar, wind, energy storage, wood products, agri-food, and other sectors.

Finance Minister François-Philippe Champagne’s March visit to China furthered this agenda by moving the conversation from broad political commitments to more concrete discussions on investment and sectoral co-operation.

It also underscored a central challenge for Ottawa: much of the Chinese capital Canada may seek to attract is state-directed or closely aligned with Beijing’s industrial priorities. That makes a more disciplined investment framework essential.

Prime Minister Carney has already signalled that some sectors — including AI, quantum, defence, and space — are not going to be on the agenda for deeper co-operation with China. That is important but insufficient.

The harder questions are in the grey zones: oil and gas infrastructure, critical minerals processing, battery supply chains, renewable energy, ports, logistics, data-linked technologies, and advanced manufacturing.

Canada needs a much more granular framework for Chinese investment. It should be clear which sectors are open, which require enhanced review, which require Canadian control or trusted-partner structures, and which are excluded because of national or economic security concerns.

Without that clarity, Ottawa risks sending mixed signals — encouraging investment in broad terms while leaving investors, provinces, allies, and the Canadian public uncertain about where the guardrails actually are.

National Security and Rule of Law

The third area is national security and rule of law. One likely outcome of Wang’s visit is progress on reviving bilateral dialogue mechanisms, including the National Security and Rule of Law Dialogue created in 2016 and left dormant after the crisis in relations that began in 2018. Reviving channels of communication is sensible.

Canada and China need forums to discuss difficult issues, including foreign interference, transnational repression, intimidation of diaspora communities, arbitrary detention, human rights, and the treatment of Canadian citizens and residents connected to China, Hong Kong, Tibet, Xinjiang, and Taiwan.

These issues do not disappear because economic ties improve. Nor can they be handled entirely behind closed doors. Diplomacy, of course, requires private conversations. But in a democracy, public trust also requires some degree of transparency and public clarity. Canadians need to know that the government is not trading silence on values and security concerns for short-term commercial gains.

Canada’s task is not to exchange one form of strategic dependence for another. It is to reduce vulnerability, expand options, and build resilience.

That is especially important because this visit will be watched not only in Ottawa and Beijing, but also in Washington, Tokyo, Canberra, Taipei, Manila, and other capitals. Canada’s partners understand why Ottawa wants to stabilize relations with China.

Many of them have their own complex economic relationships with Beijing. But they will also be watching whether Canada’s new pragmatism is disciplined and principled, or whether it becomes a softer form of strategic accommodation.

This regional context matters. China is not just a large market. It is also a Party-state whose policies are reshaping the Indo-Pacific security environment. Its pressure on Taiwan, coercive behaviour in the South China Sea, use of economic leverage, and support for Russia’s war effort in Ukraine are not peripheral to Canada-China relations. They are part of the strategic context in which this relationship now operates.

A credible Canadian China policy must therefore do several things at once. It must pursue areas of co-operation where Canadian interests are clear — agriculture, energy, climate, public health, financial stability, people-to-people ties, and carefully screened investment.

But it must also speak clearly about the sources of risk and the systemic challenges China represents. Pragmatism should not mean pretending that strategic differences are merely irritants to be managed.

The American Angle

The final and perhaps most delicate dimension of Wang’s visit is the United States. Beijing’s outreach to Ottawa is not only about Canada. It is also about signalling to Washington that China can deepen relations with one of America’s closest allies and neighbours at a moment when U.S.-Canada relations are under significant strain.

For Beijing, that is a diplomatic and propaganda win. It allows China to present itself as a stable and pragmatic partner while the United States is seen as unpredictable, protectionist, and transactional.

Canada should not be naïve about that. The fact that China sees opportunity in Canada’s search for greater strategic autonomy does not mean Canada should refuse engagement. It means we must be exceptionally clear about our own interests.

The United States remains Canada’s most important economic and security partner. That will not change because of one visit by Wang Yi, or a trade arrangement with China, or even a new strategic partnership. Canada’s task is not to exchange one form of strategic dependence for another. It is to reduce vulnerability, expand options, and build resilience.

That requires careful triangulation. Ottawa is trying to diversify beyond over-dependence on the U.S. market while preserving preferential access to that market. It is trying to engage China where there are economic gains, while protecting sensitive sectors and reassuring allies. It is trying to build a more independent foreign policy, while recognizing that geography, defence, energy, and trade still bind Canada deeply to North America.

This is not an easy game. Hedging is difficult for any country; it is especially difficult for Canada because our economic exposure to the United States is so high and our domestic capacity to absorb shocks remains limited. But that is precisely why Wang Yi’s visit is consequential. It forces Ottawa to move from rhetoric to choices.

The government has described its China policy as pragmatic. That is the right starting point. But pragmatism without principles can become accommodation. Principles without pragmatism can become posturing. Canada needs a balance of both.

Clarity is Crucial

Wang Yi’s visit should therefore be judged by the clarity it produces. Does it tell Canadians which sectors will move forward and under what conditions? Does it show how the government will protect national security and economic security while pursuing trade and investment?

Does it provide reassurance that foreign interference, transnational repression, human rights, Taiwan, the South China Sea, and Ukraine remain on the agenda? Does it demonstrate that Canada can engage China without becoming complicit in CCP’s narrative?

The Carney visit opened the door for greater Canada-China engagement. Wang Yi’s visit begins the harder work of deciding what Canada is prepared to do on the other side of it.

Vina Nadjibulla is Vice President of Research & Strategy at the Asia Pacific Foundation of Canada. This commentary was originally published in Policy Magazine.

Donald Trump was in Beijing last week for a summit with General Secretary Xi Jinping. A lot has changed since the last American state visit to China in 2017. Then he was still seen as the de facto leader of an admittedly disoriented West. Nine years later, as Trump sat at that long table in the Great Hall of the People, he did so only as the president of the United States. “America First” is eroding Washington’s strategic position toward America alone.

This is Part II of a series of posts expanding on my essay in Foreign Affairs, Trump’s China Trap. I invite you to read it (or the archived version) and Part I. It takes some time for the real results of summits to manifest in the tea leaves. So while everyone else does hot takes, here we’re going to continue exploring the dynamics that shape these visits. We’ll drink the Trump-Xi tea once it’s properly steeped.

The United States’ greatest advantage over China isn’t technology, military power or the dollar. It’s allies. The Global West is half the world economy and the largest concentration of advanced manufacturing, capital markets, universities, and intelligence-sharing in human history. China has no equivalent. And yet Trump has spent the past year systematically dismantling that advantage, and in so doing, weakened his own hand in negotiations with Xi.1 PRC officials have spent a year watching this and exploiting their growing leverage with every other visitor they receive accordingly.

The result has been a succession of Western leaders parading to Beijing in pursuit of various prizes, only to find themselves cast as supporting characters in the Chinese Communist Party’s propaganda theatre. If insanity is doing the same thing over and over again and expecting different results, why do these politicians—now including Trump—keep acting like this?

What can IR theory tell us about this behaviour?

The prevailing narrative is of a long-term geopolitical shift in the relative power of the United States and China, and with that a shift in the international system from unipolarity toward bipolarity or multipolarity (the remaining debate centres on which it will be: G-Zero, G-2 or multiplex). The immediate driver is Trump’s own neopatrimonial self-dealing, bully’s impulsive aggression toward weaker countries, and insecure vacillation in the face of PRC pushback. For lesser powers, that toxic combo has further stoked anxiety about America’s flagging willingness to shoulder the burden of hegemony, and resentment of Washington’s increasingly insistent demands on allies and partners to do more. Trump has his own reasons, which we’ll come back to another time. First, the analytical framework.

Most commentaries amount to saying that these Western visitors to China are hedging under duress. In other words, they’re cultivating competing relationships to keep options open; shoring up a vulnerable flank with Beijing so they can focus on managing pressure from a newly truculent Washington. As Suzanne Nossel recently observed:

States are no longer hedging within a system that is episodically volatile but out of a recognition that there no longer is much of a system at all. The rise of what we might call “hedgemony” is both a response to the reshuffling of the global order and an accelerant of this transformation.

That framing’s broadly correct in aggregate and consistent with my own argument, (and I wish I’d thought of “hedgemony”) but both essays blur distinctions that matter. International relations theory offers a more precise set of lenses for sorting through what these leaders are actually doing—and why most of it isn’t working. Let’s shine five theoretical spotlights, each of which illuminates a different layer of the problem.

1. Historical reality: states facing the same threat choose divergent strategies

The classic neorealist binary—balance against threats, or bandwagon with them—has been pushed back on for decades by historians of actual diplomatic practice. Paul Schroeder’s 1994 International Security essay, “Historical Reality vs. Neo-Realist Theory,” is the canonical statement against neorealism. Surveying centuries of European diplomacy, Schroeder argued that states facing the same threat regularly chose among the following distinct strategies:

1. Balancing: forming counter-coalitions against the threat;

2. Bandwagoning: joining the stronger side for protection and payoffs at the cost of some independence—at essence, Thucydides’ “the strong do what they can and the weak suffer what they must”;

3. Hiding: declaring neutrality, withdrawing into isolation, or seeking quiet protection without alliance commitments;

4. Transcending: trying to escape the conflict altogether through new institutional arrangements involving consensus, norms, and shared procedures; and

5. Specializing: surviving by claiming distinctive functional roles in the international system.

Two of Schroeder’s observations particularly matter here. First, bandwagoning is historically more common than balancing for smaller powers, particularly when the cost of resistance looks high and the rewards of accommodation look immediate. Second, in every era he studied, states facing the same threat chose divergent strategies, and those divergences often mattered more than systemic constraints did.

That second point describes the parade of visits exactly. Beijing isn’t facing a coherent Western response. It’s facing over three dozen different government responses.2 Each is running its own variant of hiding, bandwagoning, and balancing—and PRC officials are calibrating their responses to each.

2. When statesmen think defence works, they pass the buck

Schroeder’s typology is the lens for sorting individual leaders. But the deeper diagnosis of why so many of them are converging on accommodation comes from an earlier essay, Thomas Christensen and Jack Snyder’s “Chain Gangs and Passed Bucks: Predicting Alliance Patterns in Multipolarity.” They argued against Kenneth Waltz’s neorealist theory that multipolarity is inherently unstable. Their move was to add a variable: the perception of the offence–defence balance. Two distinct alliance pathologies follow from it:

Chaining into a gang: When states perceive offence as dominant, when they believe an attack on any ally rapidly degrades everyone’s security, they form tight, unconditional commitments. The pathology is chain-ganging: the alliance pulls members into wars they wouldn’t otherwise have chosen. 1914 is the classic example.

Passing the buck: When states perceive defence as dominant, when they believe they can survive without immediate balancing, they free-ride. They hope someone else will bear the costs of confronting the rising power. The pathology is buck-passing. The interwar 1930s is the searing historical case: Britain and France passed the buck to the USSR; the USSR tried to pass it back; everyone hoped someone else would handle Hitler.

Christensen and Snyder also made a crucial, less remembered point: those perceptions of the offence–defence balance are usually wrong, and the source of the misperception is structural. Pre-1914 leaders thought offence was dominant because 19th-century European wars had been short and decisive; but machine guns, barbed wire, and entrenched defences already favoured defenders. Pre-1939 leaders thought defence was dominant because they remembered the trenches; but mechanized warfare had restored offensive advantage, which they didn’t recognize until France fell in six weeks. The category they ended up in was the one their experience had taught them not to expect.

Let’s apply that to 2026: The formative experience of the current generation of Western policymakers was the post-Cold War era: economic integration, sanctions diplomacy, the inherited Cold War lesson that engagement transformed authoritarian behaviour, the apparent victory of liberal globalization. That experience produced a perception that defence would be successful against PRC mercantilism and coercion; that liberal economies can absorb the costs, strategic patience pays and any individual sector lost is recoverable. This perception is the engine of the buck-passing visible across the wave of visits.

But if Christensen and Snyder are right about the mechanism, then the perception is probably wrong. The Second China Shock, the CCP’s simultaneous coercion of Australia, Lithuania, and Canada, its October 2025 demonstration of rare-earth chokepoint control, the €310 billion EU–China goods trade deficit overtaking the U.S.–China trade deficit: these all suggest that when it comes to economic coercion, offence is more dominant than Western leaders have expected. French President Macron’s “matter of life and death for European industry” formulation is an attempt to correct the misperception. Whether other leaders accept—and act on—the correction is the exam question. Christensen and Snyder would predict they probably won’t, until a triggering event forces them to.

That’s the structural worry the interwar parallel actually carries: not that Xi is Hitler or Trump is Chamberlain, but that the same misperception of the relative power of offence and defence could produce the same window of consolidation by a revisionist power (China) that buck-passing always opens. It’s what keeps me and many likeminded China hands up at night.

Schroeder himself noted his “hiding” category may be related to buck-passing, but insisted hiding is broader, and can involve “a search for some method of handling the threat apart from being drawn into the power-political fray, often by a very active foreign policy.” It’s a meaningful distinction. The four visits of Spain’s Pedro Sánchez we discussed in Part I of this series are active foreign policy, not passive free-riding. Hiding captures agency in seeking accommodation in a way buck-passing doesn’t. The two categories overlap but aren’t identical. Buck-passing illuminates the approach of most visiting leaders more clearly: they acknowledge the threat exists while counting on someone else to bear the cost of confronting it.

3. Bandwagoning isn’t always defensive—sometimes it’s opportunistic

A predictable critique of the typology is that several of these leaders “aren’t really bandwagoning” because they don’t face a security threat from China in any conventional sense. Randall Schweller’s 1994 essay “Bandwagoning for Profit: Bringing the Revisionist State Back In” dismantles that objection. Schweller argues that realist scholar Stephen Walt’s balance-of-threat theory—in which states either balance against a threat or bandwagon by capitulating to it—systematically excludes the most common form of bandwagoning: aligning with a rising power to gain, not because you have to.

In Schweller’s vocabulary, “balancing is driven by the desire to avoid losses; bandwagoning by the opportunity for gain.” He distinguishes “jackal bandwagoning”—toadying to a rising expansionist power to share the spoils—from defensive “piling-on” bandwagoning with a status-quo coalition once an outcome is already determined. The first decreases system stability; the second can enhance it.

This is the move Slovakia’s PM Robert Fico and (less openly) Spain’s Sánchez are making. Fico attending a WWII anniversary parade alongside Vladimir Putin and Kim Jong-un while attracting a Chinese battery factory with €214 million in Slovak state support while giving the EU the finger is jackal bandwagoning: not a defensive response to threat but an offensive bet on the rising side of an order in motion. Spain’s Chery-Ebro plant is bandwagoning and free-riding in a Chinese electric vehicle: Sánchez accepted investment from Chery that undermines the EU’s own economic security defences, on the bet that Brussels will absorb the systemic cost. South Korea’s Lee softening the semiconductor coalition while asking Xi to mediate with Pyongyang has the same flavour: trade short-term security goods for accommodation gains.

Schweller’s point is that this kind of behaviour isn’t an aberration. Bandwagoning, he argues, is more common than balancing because it “rarely involves costs and is typically done in the expectation of gain.” Balancing is costly. Most states would rather not do it. The cases that look puzzling under Walt’s framework—why is country X accommodating when it isn’t under direct threat?—stop being puzzling under Schweller’s: because there are gains on offer and someone else is paying the systemic cost.

4. Every visit is an entrapment/abandonment trade

All these leaders seem to be following the Corleone family maxim: keep your friends close, but menacing great powers closer. They hope proximity will unblock channels for dialogue and enable early warning of intentions. But with the ultra-secretive Leninist Party-state, proximity is never symmetric. Most guests seek influence in vain, reveal far more than they learn, and risk being co-opted into its agenda and narratives.

A fourth lens, Glenn Snyder’s 1984 “The Security Dilemma in Alliance Politics,” names what each of these leaders is actually navigating in real time. Every ally faces two opposed risks: entrapment, being dragged into a partner’s conflicts and positions you’d rather avoid; and abandonment, the partner walking away from commitments when you need them. The risks are inversely related. Pushing back hard against a patron reduces entrapment but increases abandonment. Hugging the patron close reduces abandonment but increases entrapment. U.S. allies are living this.

Trump has rewritten both sides of that trade-off simultaneously. He’s raised abandonment risk by publicly questioning NATO Article 5, treating allies as transactional counterparts, and conceding the Nvidia H200 semiconductor framework after years of allied coordination. And he’s raised entrapment risk in a particular American way: not entrapment into a hot war, but entrapment into volatile tariff escalations, secondary sanctions exposure, and rhetorical flourishes allies are embarrassed to be associated with.

Carney, Starmer, Merz, and Lee are all visibly making entrapment/abandonment trade-offs in their Beijing conduct. Meeting Xi in China is a form of insurance against U.S. abandonment (“we’ll keep this channel warm in case Washington erupts”) and partly an effort to reduce entrapment in Trump’s next escalation (“we’re a separate diplomatic actor with our own China relationship”).

The trouble is that when every junior partner runs the same play simultaneously, as my essay argued, the collective effect is to weaken the alliance system the abandonment fear is responding to. Each individual hedge is rational. The aggregate is the disintegration Macron warned Xi about. Mao thought chaos is a ladder. Xi’s handling of the Trump visit suggests he may worry it’s more of a pit—but don’t expect him to lift a finger to stop others falling into it.

5. Hedging as neutrality with a contingency plan

Finally, the more recent IR literature on hedging—most cleanly articulated in Fabio Figiaconi’s 2025 paper “Choosing not to choose”—helps explain why “hedging under duress” so often produces incoherence. Figiaconi reconceptualizes hedging as a new category of neutrality: adopted voluntarily by secondary states when they perceive a rise in great-power tensions and a possible power transition; grounded in the state’s own strategic calculations rather than law or morality; never declared explicitly; and easily abandoned when conditions change.

The distinguishing feature, in Shakthi De Silva’s phrase that Figiaconi cites, is the contingency element: hedging isn’t just keeping options open, it’s actively developing fallback options in case the system becomes more polarized. As my high school chemistry teacher used to say, if the experiment doesn’t work, “you gotta have a backup plan”.

That contingency element is what most of the Beijing paraders aren’t actually doing. They’re taking the bilateral commercial gains now and trusting that systemic contingencies—EU-level countervailing duties, U.S. security guarantees, the WTO—will be supplied by someone else. That’s not hedging in Figiaconi’s strict sense. It’s buck-passing play-acting as hedging.

Real hedging would mean each leader returning from Beijing with a parallel investment in the institutional fallback mechanisms. Few of them are.

International Relations 201 class dismissed. Want more? Here’s some recent media coverage of my essay and its arguments:

Konrad Yakabuski, “On his second China trip, a weakened Trump comes face to face with the new world order”, The Globe & Mail, 2026-05-13 (archived)

Michael Koziol, “The ‘big danger’ for Australia as Trump meets Xi”, Sydney Morning Herald, 2026-05-14 (archived)

Baptiste Gauthey, “Donald Trump a poussé ses alliés dans les bras de Xi Jinping” : l’analyse de Michael Kovrig,” L’Express, 2026-05-14 (archived)

Next: Trump and Xi at the Temple of Thymos

With the assistance of Patricia Xavier and Joseph Widacki

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An unprecedented wave of Western leaders has visited China since Donald Trump’s return to the White House. Now this 访华潮 (fǎng huá cháo) of politicians is rising to a foamy crest as the U.S. President rolls into Beijing this week. While each dignitary arrives in Xi Jinping’s court hoping to stabilize relations and influence the General Secretary, instead they usually get co-opted into serving the Communist Party’s agenda and participating in its propaganda. Even with American power behind him, Trump will almost surely get trapped in the same accommodating pattern.

Last week, Foreign Affairs published my essay about this problem (gift link).1 Now, in this first of a series of posts on the wave, we’ll explore some of the more compelling research findings that didn’t make it into Foreign Affairs and extract some pointers the Donald and those who follow him should consider.

The crux of the problem: By accepting the terms the CCP sets for meeting Xi, and by performing in his autocrat’s pageant, they’re fulfilling his yearning to be recognized as the superior statesman—what Francis Fukuyama would call his megalothymia. More dangerously, as global deference to Xi’s power becomes normalized, the risk grows that any dependence on China will be weaponized by a regime that sees displays of acquiescence as evidence of weakness on the part of liberal democracies.

To end this cycle, the essay argues, we need a different measure for success for visits to China: not the dollar value of the deals signed or the warmth of the welcome, but the level of constraint imposed on the Party-state’s coercive impulses. What really matters is not what each leader gets, but in aggregate what the Party learns.

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For some perspective, let’s run through all the visits since Trump’s inauguration.2

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Now let’s dive deeper into some recent visits to better understand their dynamics.

Carney’s contradiction: do as Davos Man says, not as he did

The 2026 wave’s most consequential visit, Mark Carney’s time in Beijing reveals the pattern in its most paradoxical form. The archetype of what Samuel Huntington called Davos Man, Carney used explicit normalization language (“renewing the relationship,” “strategic partnership”), framed PRC coercion as a trade irritant to be negotiated away, relied heavily on institutional mechanisms and memoranda, seemed optimistic that reciprocal widening in market access could stabilize relations, and minimized the moral signalling. My impression is he’s not naïve, he’s invested in systems: a crisis manager attempting to re-wire exposure through diversification and technocratic bargaining rather than power signalling.

Carney is also the only Western leader who’s articulated a coherent strategic alternative to the binary of either balancing against or bandwagoning with China. His Economist essay and World Economic Forum speech laying out his “variable geometry” concept — middle powers acting through new coalitions of necessity rather than depending on a reliable America — are the most ambitious recent statements on how transcending the binary might actually work in practice. I wrote about them for Foreign Policy in a February commentary, “The Carney Doctrine Can Be More Than a Davos Speech.”3

But Carney’s conduct in Beijing was the opposite of his Davos rhetoric, a contradiction that’s largely been ignored. As I analyzed in the Toronto Star, his delegation appeared overly conciliatory.4 Rather than resist the Party’s status-defining choreography, Carney leaned into it more than most other Western leaders had. The smiles, the “new world order” line caught on video with Premier Li Qiang, the public adoption of CCP propaganda about multilateralism, the rejection of “megaphone diplomacy” — these were the price of entry to the audience with Xi, and Carney paid willingly.

Canada’s PM lowered import barriers to Chinese EVs in exchange for tariff relief on agri-food exports, fracturing North American alignment on Chinese state-subsidized goods. Beijing established that a U.S. ally spurned by Trump could be pressured to break ranks—and that Canada would tolerate hostage-taking, executions of its citizens, and active threats and interference in the hopes of diplomatic stability and economic relief. That set a dangerous precedent for every subsequent visit.

The flurry of commentary Carney’s ideas spurred often overlooked his performance in Beijng. But with the CCP, optics always have enormous significance. Economically, Canada matters relatively little to most Chinese firms. The real prize for the Party wasn’t access to Canada’s market, but rather the spectacle of America’s neighbour and longtime loyal ally seemingly kowtowing. While Xi, Putin, and now Trump may see the comportment of that delegation and others as the toadying they expect all weaker countries to show, it sets an awkward benchmark for others and contributes propaganda-ready evidence that justified outrage at PRC violations of international laws and norms can be dismissed as irrelevant or politically-motivated. As Carney himself said days later at Davos:

“When we only negotiate bilaterally with a hegemon, we negotiate from weakness. We accept what is offered. We compete with each other to be the most accommodating. This is not sovereignty. It is the performance of sovereignty while accepting subordination.”

Variable geometry is a strategy; situational ethics is a failure of principle. Carney has the strategic vision. The question now is whether his further conduct will match it, or whether his doctrine began consuming itself before it even got started.

Starm Offensive: talk is cheap when it’s private

The first UK PM visit to Beijing in eight years was an effort to revive relations after they had gone from a “golden era” under David Cameron to an ice age after China effectively abrogated the Sino-British joint declaration on Hong Kong and various disputes accumulated. Saying he wanted to avoid blowing hot or cold, Sir Keir Starmer set off for Beijing in late January as a managerial pragmatist under severe political constraint due to his domestic unpopularity. Looking for retail wins on what insiders called another “Starm offensive,” he ran a classic business delegation visit heavy on formal cordiality, commercial dealmaking and sectoral agreements.

Ahead of his trip, I offered several recommendations in The Times of London5 and a Substack post. None were more pressing than to put political prisoner Jimmy Lai—a Hong Kong publisher, democracy advocate and British national—and roughly 200 other political prisoners in Hong Kong front and centre. Publicly. Defenders of the visit answer that he did raise Lai’s case. Privately. What of it?

This is where the “cheap talk” literature in international relations is helpful. From Crawford and Sobel onward, the foundational insight is that signals which generate no audience cost convey no information. A leader who discreetly mentions a thorny issue can claim at home to have “raised the matter” while the other government understands no political price will be paid and no consequences imposed. A Western official once told me of a visiting prime minister who remarked to Hu Jintao that he’d noted Hu’s earlier role as Party Secretary in Tibet—thus enabling him to report that Tibet had been discussed. That’s the cynical floor of private representations.

Starmer and Lai showed the ceiling isn’t much higher. Set Lai’s case against two precedents and the choice becomes harder to explain — until you notice what actually predicts the response. In 2013, when British investigator Peter Humphrey was detained in Shanghai for 23 months on fabricated charges, Prime Minister Cameron and Foreign Secretary Osborne were in the midst of their “golden era” sucking up to China. Osborne went to Beijing weeks later to announce the “next big step,” and the case stayed largely consular. In 2019, when a Hong Kong national working at the British consulate in Shenzhen named Simon Cheng was tortured into confessing that Britain was behind the Hong Kong protests, the golden era was already collapsing under those same protests; Foreign Secretary Dominic Raab used the word “torture,” summoned the ambassador, expressed “outrage,” and granted Cheng asylum. It was a staggering contrast to the response to Humphrey’s detention—and to Lai’s.

Days after the visit, a Hong Kong court sentenced Lai to 20 years on manifestly political charges. London responded with statements of disappointment and an immigration tweak for Hongkongers that was already in the policy pipeline. No ambassadorial recall, no Magnitsky-style sanctions on the responsible Hong Kong officials, no restriction of bilateral contacts, no use of the leverage the visit itself had just created. In Starmer’s personal Substack post the weekend after returning—framed around cost-of-living relief and “a shared sense of history”—Lai’s name doesn’t appear. As Britain drifts back toward an engagement posture, the tools to apply pressure haven’t disappeared. The will to use them has.

First we take Merz… then we take Berlin

German Chancellor Friedrich Merz’s visit produced a mixed outcome. He talked up Xi’s approval of purchases of Airbus jets—which China Eastern Airlines and China Southern Airlines likely already needed—as the most tangible success of his trip. But Beijing has used political calibration of aircraft orders as diplomatic currency since Richard Nixon’s 1972 visit, and is on track to repeat the trick with Boeings for Trump. To his credit, Merz did raise festering problems in the relationship between Germany and China, including overcapacity, the artificially weak yuan, rare-earth coercion, and support for Russia’s war in Ukraine more directly than other visitors, both publicly and privately. However, he also adopted some of the CCP’s preferred language while softening Germany’s own, and a month later, Merz signaled further accommodation by saying he could “imagine” an EU-China free trade agreement that Chinese officials are pushing. Much more in these posts:

Flirty Sánchez: Beijing bikini bares soft underbelly

The Foreign Affairs essay necessarily treats Spanish Prime Minister Pedro Sánchez briefly, but his case is worth examining in more detail. Sánchez is a frequent flier: four visits in four years.

In April 2025, arriving just nine days after Trump’s “Liberation Day”, he became the first European head of government to meet Xi in the new tariff era—and used the visit to call publicly on the EU to rethink its China relationship, in open defiance of a U.S. Treasury Secretary warning that Spain was “cutting its own throat.” The visit continued a pattern from prior trips: diluting EU countervailing duties on Chinese EVs from within (Spain had abstained on the October 2024 vote) and modelling how member states could quietly drift from Brussels.

Sánchez then dispatched his foreign and economy ministers, sent the King and Queen on the first state visit in 18 years, with a wreath laid in Tiananmen Square (the EU still has an arms embargo on China for the 1989 massacres sparked there).

On his April 2026 trip, Sánchez signed a permanent strategic dialogue mechanism that institutionalizes the channel beyond his own tenure.

Each individual trip has looked defensible: agri-food protocols on pork by-products, cherries, pistachios, and dried figs; Chinese battery and EV plant investment; and a hedge against U.S. tariffs and an unpredictable White House.

But the cumulative numbers tell a different story. Spain’s goods trade deficit with China widened from €37.7 billion in 2024 to €42.3 billion in 2025; Spanish corporate investment in China collapsed to €4.54 million in 2025—the lowest level in three decades—while Chinese investment into Spain rose to €643 million, a 160-to-1 asymmetry. Chinese state-supported companies are establishing manufacturing footholds inside Spain explicitly engineered to circumvent EU defenses. The Chery-Ebro EV plant near Barcelona, marketed as a flagship Chinese investment, ships prefabricated vehicle bodies from China for final assembly in Spain to obtain EU origin status, hollowing the bloc’s countervailing duties on Chinese EVs from within. Madrid waves through such investment without technology-transfer requirements.

Most consequential is the language Beijing put in his mouth. The official Chinese readouts of Sánchez’s April 2026 meetings with both Xi Jinping and NPC Chair Zhao Leji say Spain “firmly adheres to the one-China principle” rather than the “one-China policy.” The “principle” accepts Beijing’s claim that Taiwan is inalienably Chinese. The “policy” — used by most Western governments, including Spain’s own Foreign Ministry — acknowledges only that Beijing holds that view. The PRC has been pressing other capitals to make exactly this substitution for years; with Sánchez, it appears to have succeeded. His office subsequently pointed reporters to the Spanish Foreign Ministry’s standing “policy” position, but the readouts remain on the PRC MFA’s website.

Beijing to Canberra and Back

Misrepresenting the one-China policy, leader-level meetings, and the impasse endures

A one-China policy or principle…

Read more

4 years ago · 1 like · 1 comment · Benjamin Herscovitch

Sánchez also endorsed Xi’s “Four Global Initiatives” by name, echoed China’s “new multipolar order” rhetoric (CCP code for supplanting the United States) and opposed a “new Cold War” (a CCP thought-terminating cliché to suppress awareness of the threat it poses and efforts to align against it). To his credit, Sánchez did use a lecture at Tsinghua University to call on China to open its market so that Europe wouldn’t have to close its own:

“To help us correct the current trade deficit we have with it. A deficit that is not balanced, that grew again by 18% last year alone, and that is unsustainable for our societies in the medium and long term. And it is unsustainable because of the isolationist movements it fuels and the grievances and social pain it causes. To give you an idea, our trade deficit with China already represents 74% of our country’s total deficit.”

That was what he needed to say. Still missing was any hint of consequences for China not acting, or any mention of who needs to do what to make change happen.

Spain’s defenders argue that engagement is “structured and conditioned”—that Sánchez’s access can be used to extract concessions on rare earths, services markets, and Russia-Ukraine. Well, after four years and four visits, Beijing has yielded on none of them. As Spanish economist Alicia García-Herrero notes, the relationship has become deeply unbalanced and “Madrid is increasingly losing more than it contributes.” Chinese commentators now describe Madrid’s posture as a model—样板 (yàngbǎn)—for other Europeans to follow. European capitals describe it as an anomaly closer to Orbán’s Hungary.

Cumulatively, Spain has converted itself from a hedging middle power into something approaching a junior partner in Xi Jinping’s preferred world order. Where Carney proffered cordiality and a crack in fortress North America, and Starmer and Merz allowed critical problems to fester, Sánchez delivered legitimacy and a soft underbelly for Europe. Most dangerously, he represents the debased equilibrium toward which the wave of visits will continue drifting if no one summons the courage and will to break the pattern.

All of these developments raise a question: why are Western leaders submitting to China, one by one, when they would be better off presenting a common stance with Beijing? In the next post, we’ll apply international relations theories to explain what compelled these leaders to act as they did.

With assistance from Patricia Xavier and Joseph Widacki. Thanks for reading!

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What kind of world does the Chinese Communist Party want? It’s not trying to overthrow the international system in one dramatic rupture. Instead, amidst the current chaos, it’s moving more subtly: embedding itself in existing layers of order, preserving institutions and rules it can exploit for control and influence, while working to purge the liberal elements that constrain its Leninist and realist geopolitical logic.

That question was at the heart of a panel discussion I recently had at London’s Frontline Club with King’s College London scholar Olivia Cheung and Carnegie Russia Eurasia Center director Alexander Gabuev, moderated by former BBC China correspondent Robin Brant. Organized by the China Correspondents’ Club of London, our conversation focused on General Secretary Xi Jinping’s ambitions and understanding of power, and the opportunities he sees in the disruption of the Trump era and resulting Western disunity. We also touched on China’s economy and its relations with Europe, Iran, Russia, Taiwan, Ukraine, and the Global South. I hope you enjoy this edited transcript of our March 30 discussion.

China wants preeminence, not hegemony

Olivia Cheung: China is aiming for global preeminence, but not global hegemony. From a Western perspective, that distinction might seem purely academic. It might not make a difference, but for countries that do not share Western values or take them with skepticism, it matters. So how does that distinction look in practice? There are many examples. If we look at current events, we can make it more concrete, but in broad terms it means that China is there to defend its bottom line, red line core interests as defined by the Chinese Communist Party, and the successful defence of these is considered absolutely necessary.

These core interests include security, China’s political system and way of governance, sovereignty, and development. It also means the Chinese Communist Party takes very seriously the need to resist unwelcome influence or leverage from other countries, including the ability to impose costs on countries that challenge these core interests. This kind of bottom line or red line thinking remains crucial in CCP mentality.

The other part of China’s perception of global preeminence is the desire to be recognized as a global moral force for good for all humanity. There is some messaging in that, but China is serious about it, so it should not be dismissed as a slogan. Materially, it means China wants the world to embrace it as a force for modernization, economically and technologically, and in a more “spiritual” sense, to stress its identity as an alternative power without colonial baggage, and as a reliable partner to uphold a rules-based international order while also changing the rules to make them more “just and fair”, and in that sense democratizing international relations in a way that would uphold the interests of the Global South, with China at the centre.

China sees global relations not in terms of competition with the United States, but as a pursuit of global preeminence on these terms. To do that, China has a global strategy with two main components: The first is to democratize international relations by cultivating support from the Global South, and the second is to prepare to take Taiwan and achieve this ambition.

These two goals are what my colleague Professor Steve Tsang and I conceptualize as the “double pivots” of China’s global strategy in a forthcoming work we are publishing with Oxford University Press in September.

The CCP wants to reshape the international system to better advance its own interests

Robin Brant: China as a force for good—its ability to persuade those who may need persuading—is that possible? Do you see that happening in the years ahead?

Michael Kovrig: The Party-state and its propaganda organs are investing billions to persuade the world of that. There are people within that system who may not quite frame China as a “force for good,” but who believe their system is highly effective at accomplishing ends.

The Party-state runs on a blend of Leninist ideology, political culture, and organizational behaviour. It’s not a government in the way a Western liberal democracy operates, with a focus on short-term deliverables and responsiveness to voters. The Party-state is different. It’s oriented toward long-term grand goals, with elements of utopianism, even alongside political corruption, internal infighting, and contradictions.

It’s mobilizing toward those goals and wants to embed itself in the international system, which makes it a revisionist power. It seeks to change the system to make it more amenable to an authoritarian, one-party state that, in many ways, behaves as an offensive realist actor. It views the liberal rules-based international order—the post–World War II order led by the United States and its allies—as a hostile environment.

So it wants to reshape that order. It doesn’t necessarily want to cause revolution or act as aggressively as Vladimir Putin’s Russia, but to move more subtly, reshaping and in some ways hollowing out the system into something it can influence and control. It prioritizes state power and the preservation of Chinese Communist Party rule. In many ways, it believes in what it’s doing.

But from the perspective of Western liberal democracies, or those who emphasize the United Nations Charter, Universal Declaration on Human Rights, and Enlightenment principles, this is a hostile geopolitical agenda. It ultimately seeks to weaken the United States and push it down the hierarchy of countries, while dividing and weakening Western nations.

I would disagree with the idea that this is about “democratization of international order”. It reflects a hierarchical view of the world.

It does aim to push back against what it sees as American hegemony, and I agree with Olivia’s characterization that it seeks preeminence rather than hegemony. That distinction can resemble a rising power seeking more influence without taking on all the responsibilities that come with it. Part of what the Trump administration grapples with is the reality that the established hegemon was growing tired of those burdens. China’s seeking greater influence without assuming all the associated costs.

At the same time, China wants to present itself as a leader of the Global South that offers those countries a greater voice in world affairs. For some, that’s appealing. But expectations that this would produce a genuinely more democratic system overlook how the CCP operates. The system would be authoritarian and hierarchical. For smaller or weaker countries, any influence they gain would be limited and exercised within a China-centric hierarchy, with China as the central state shaping the system.

Robin: Alexander, Donald Trump—certainly in his second iteration—and the lack of movement around him, and those around Xi Jinping more broadly, share disruptive tendencies, don’t they? They are similar in that respect. There is quite a lot that these two men, and the political acolytes around them, share, particularly in the disruption and change they want to see?

Alexander Gabuev: If anyone really knew what Trump is trying to achieve, they could write a memorandum, enlighten all of us, and probably make a lot of money. The famous Western “philosopher” Roger Federer said that success in a game is not about hitting more winners than your opponent, but about making fewer mistakes. If I look at what Trump does and what China does, we can agree that China makes plenty of mistakes, particularly in economic policy, suffocating entrepreneurship. There are aspects of Chinese policy that are mistakes not just because of value differences, but because they do not bring China closer to its aims of preeminence.

Trump’s disruption is giving Beijing an opening

Robin: Michael, can I talk to you a bit about Western countries and the NATO alliance, and what Donald Trump has forced NATO to do—finally get its act together, he would say—certainly in terms of their own military spending? But a stronger NATO is not really what Xi Jinping wants to see, is it? And more broadly, the reaction from parts of the West to Trump and what he is doing to some of these international institutions.

Michael: The Chinese Communist Party is making hay while the sun shines. It’s seizing some advantages from what the Trump administration is doing, particularly in the way it’s doing it. What Party-state wants is a weak and divided European Union and a broken, non-functional NATO, because it views any coalition of states, particularly liberal democracies, as a potential check on its room to maneuver and its power to shape the global system.

Since the second Trump administration began, there has been what the Chinese have called a “访华潮” (fǎng huá cháo): a wave of leaders going to visit China—more this year, in just the last 2–3 months, than in any year since the G20 Hangzhou Summit, which was before COVID. Why are so many Western politicians—Keir Starmer, Friedrich Merz, Emmanuel Macron, Pedro Sánchez—rushing to Beijing? What are they trying to achieve with these visits?

In some cases—like Canada, the UK, and Australia—they’ve been trying to get out of the doghouse. They were put there by China, or relations went into a deep freeze due to various disputes, and they’re trying to repair those relationships. But all of them are also looking for narrow economic benefits—cutting tariffs, securing market access, or increasing exports. They’re also trying to establish personal channels with Xi Jinping, because Xi is now so centrally powerful that without access to him and his circle, it’s very difficult to resolve problems.

They’re worried Trump is going to create more chaos, and that when he visits Beijing, he may cut a deal with Xi that leaves them exposed or puts them in a more forward-leaning or hawkish position on China than Trump himself. So they’re behaving like cyclists in a peloton that’s lost its leader, where no one wants to be at the front taking the wind.

In trying to ingratiate themselves, they’re acting on China’s stage and validating CCP narratives about China’s inevitable rise, the failure of decoupling, and the relative weakness of the West. This creates a collective action problem: while each country’s behaviour is individually rational—they want access to Xi, they want to stabilize relations, and they want to hedge against uncertainty from Washington—in aggregate, they’re reinforcing Xi’s sense of self-importance and China’s narrative of centrality.

In trying to protect themselves in the short term from what Trump is doing, they’re contributing to exactly the outcome they seek to avoid. This is producing a particularly disordered dynamic that’s breaking down many of the traditional patterns and rules of diplomacy.

More on Western leaders’ perilous parade to China

Mark Carney just ushered in a transformative moment for Canada. It’s also a risky one, Toronto Star, 24 January 2026

Robin: Olivia, on China’s foreign policy, how much of it is driven by geopolitics and design—perhaps toward some kind of grand bargain when they meet in May, which may bring Taiwan’s future into the fold? Or is it also driven by practical realities, like the fact that there are large numbers of Chinese expatriates living in places like Dubai, and the movement of Chinese investors and workers abroad? Which is more powerful at the moment in shaping that dynamic?

Olivia: Many things drive Chinese foreign policy. A baseline that makes China somewhat different from most great powers is the unusually important role of domestic politics as a driver. This is tied to Xi Jinping’s centralization of power and to China’s nature as a one-party system. Domestic politics is key. At a basic level, whatever the Chinese Communist Party does is about security. If protecting Chinese nationals abroad becomes necessary for China’s security, then it becomes a priority. If not—and most of the time it is not—then Chinese foreign policy shows a strong element of pragmatism and adaptability, which Michael highlighted. There is a capacity to take advantage of opportunistic circumstances, as we see in China’s engagement with Western leaders, while at the same time operating from what I would describe as a neorealist balance-of-power calculation. China pushes harder when it has the capability to do so, with regime security at the centre.

Alongside that, you have Xi Jinping’s focus on cultivating support from the Global South. Whether or not we are convinced by it is less important than the fact that, for many countries, it can make sense to engage with China and feel they may benefit. China can offer things that Western countries often cannot, and engaging with China does not prevent those countries from also engaging with others.

What makes China’s approach difficult to conceptualize is that it is quite nebulous. China has many “friends” and “partners,” and these categories are broadly applied. Unlike Western countries, which tend to draw clearer distinctions, in Chinese terminology almost everyone is a friend. That allows relationships to deepen in flexible ways, making alignment with China easier for many states. Countries are not asked to commit heavily upfront, and when China does seek something, it is often negotiated case by case, allowing partners to seek benefits from multiple sides simultaneously.

There is an inherent attractiveness to this approach. It also connects to the idea of “democratizing” international relations. At a basic level, it is a numbers game. The majority of countries in the world identify as part of the non-West, and China’s objective is for those countries to look at China and see something that aligns more closely with their identity and interests than what Western countries offer. In many cases, countries do see elements of that. So what is emerging is a real competition over identity, values, and the ability to present an appealing model.

Robin: Alexander, can we talk about the relationship between Moscow and Beijing? They say it has no limits, but it surely must have limits. Can you touch on where those vulnerabilities may be, and how significant Vladimir Putin and Russia continue to be for China’s project of preeminence?

Alexander: There are obvious limits, and those limits are Chinese preferences and national interests. The relationship is deep and fairly comprehensive, based on pragmatic national interests on both sides. They went through confrontation in the 1960s and 1970s and do not want to return to that because it was very costly. When the opportunity opened in the 1980s for normalization and resolving territorial disputes, they took it, and since then have followed the principle of not always being with each other, but never against each other.

If you look at the economic dimension, there is significant complementarity. Russia has natural resources but needs capital, technology, and infrastructure. China has those capabilities. There are also similarities between the regimes: two authoritarian states, both permanent members of the UN Security Council, that align on many aspects of global governance. Then you have Vladimir Putin and Xi Jinping, contemporaries with similar narratives, both resentful of U.S. dominance and seeing it as a threat to their regimes and great power ambitions.

At the same time, the relationship is deeply asymmetrical. China is a rising peer competitor to the United States, with a strong manufacturing and technological base, while Russia is on a path of relative decline due to decisions made under Putin. Russia once had access to both the European Union and China, and broader Asian markets like India, Japan, and South Korea. The war in Ukraine has burned many of those bridges and pushed Russia into China’s orbit.

For China, there is still value. Russia provides security along the northern border, reducing the need for Chinese resources there. It offers natural resources, increasingly flowing to China on favourable terms. It contributes niche military technologies, while China’s support to Russia’s war effort has also been significant.

Russia is also a meaningful, if limited, market. Not comparable to the EU, but at roughly 150 million people, it matters for certain sectors. It also serves as a testing ground for Chinese firms operating under Western sanctions, allowing experimentation with workarounds to U.S.-led pressure.

At a broader level, Russia acts as a strategic distraction for the West, consuming resources and attention. But because the relationship is so asymmetrical—China accounts for about 40 percent of Russia’s trade, while Russia accounts for less than 4 percent of China’s—China has far greater flexibility. It can engage selectively, while Russia has fewer alternatives.

That asymmetry is the real limit in what is called a “no limits” partnership.

In Europe, China divides to conquer

Robin: Michael: the European Union. You described leaders visiting Beijing. The Germans probably still have the most important relationship. But where does the EU sit between Donald Trump in his second term and Xi Jinping?

Michael: The EU is not uniform and is increasingly contested terrain. On security, there is no real prospect of separation from the United States, but China wants to keep it as distant from Washington as possible. Trump has, in some ways, helped that.

China is also trying to cultivate individual EU member states. It previously did this through the “16+1” or “17+1” initiative, targeting Central and Eastern Europe. Now it uses bilateral engagement, including with Hungary and Spain, testing who can become China’s closest partner. This is a divide-and-influence strategy aimed at weakening collective EU responses.

The core issue is geoeconomic. China’s exports to the United States have declined with rising trade barriers, and restrictions are likely to tighten. That leaves China with fewer large markets. At the same time, China is doubling down on its economic model: manufacturing expansion, overcapacity, subsidies, and technological self-reliance while increasing others’ dependence. This reflects a conception of power rooted in control over production and supply chains. China is on track to account for a large share of global manufacturing. If U.S. access is constrained, it needs alternative markets, and the EU is critical.

So China wants key states like France and Germany to struggle to coordinate on tariffs or protections. If the EU cannot act collectively, it cannot match U.S. barriers. That allows China to export excess production and sustain its model. Disunity becomes a structural vulnerability that China can exploit.

Robin: Olivia, institutions like BRICS and the Shanghai Cooperation Organization—how successful are they, and how important are they now?

Olivia: Is China building an alternative universe? Yes and no. Institutions like BRICS and the Shanghai Cooperation Organization serve a role, but are often underwhelming in concrete outcomes, for example in cases like Iran. That is because they are not alliance systems pursuing hegemony, but part of China’s pursuit of preeminence. They are not about organizing allies for collective action, but platforms to cultivate goodwill with emerging powers. Most members do not expect China to deliver much directly, but still see value in alignment.

China’s main focus is the United Nations. It emphasizes a UN-centred order but argues the system has been shaped by the West. Its role, from its perspective, is to “correct” that imbalance by increasing non-Western influence. BRICS and similar forums help build coalitions, including in UN bodies like the Human Rights Council. These institutions are not ends in themselves, but tools to reshape how the United Nations functions and how international norms are defined.

Assessing Made in China 2025

Robin: “Made in China 2025”, Olivia. It’s been a huge success, hasn’t it?

Olivia: It’s worked well, but it’s a mixed success. Xi Jinping is quite honest and open about China’s economic and technological weaknesses. In many ways, he has a more sober view than what some optimists in the West might think. A weakness is China being unable to get the West on board with its technological output. That is a serious problem for China.

Xi Jinping takes the view that although China has a lot of tech talent, the quantity is not sufficient, and China lacks top-end tech talent. Technology is constant competition—when you get there, you realize there is more to achieve. A problem for China, and for Made in China 2025, is how to get investment going into goals that require continuous funding.

We are at a time when China’s economy is facing significant difficulties, and we have not touched on demographics, which are another major problem. China is getting old before getting rich. All of this raises questions about financing China’s technological model. To address that, China needs the goodwill of countries willing to invest, and investors need to trust China and trust that their governments have good relations with China.

This means having good relations with the West is key for China’s technological project. China is working on this gradually. We still have some time, and if the geopolitical climate holds, there may be more success on that front.

Robin: There was a time a couple of years ago when China was not seen as investable. Michael, in terms of the advice you give, and this being a big part of the Five-Year Plan, to drive more foreign investment—for exactly the reason Olivia outlined—is China now more investable?

Michael: Short answer: no. But it depends on who you are and your jurisdiction. For most Western investors, China is not a prudent investment, though in certain specialized niches, possibly.

There’s a difference between massive growth across an economy (which China used to have) and concentrated success in something like Made in China 2025. China has enormous capacity to mobilize resources and large numbers of people toward major projects. It’s demonstrated that if you harness that kind of state capacity, if it puts its mind to dominating robotics, biotechnology, and AI, it has a strong capacity to do so, even with flaws. But that does not mean even those sectors are a prudent investment. Most companies involved are not necessarily profitable. There’s intense competition, subsidies, and overproduction—companies grow large but are not making money and are not delivering returns.

The overall economy is unbalanced. Consumption is in the doldrums. Real growth is low. There are many other problems: transparency issues, insider trading activity, and non-market factors affecting performance. From the 15th Five-Year Plan, it’s clear they’re doubling down on technological self-reliance, industrial resilience, and selective openness. They want foreign investment in sectors they can harness and control, but not broadly. There’s weak commitment to consumption-led rebalancing and a more explicit ambition to reshape the international system.

Then there is the geopolitical element. If strategic rivalry with the West increases, it becomes increasingly problematic to hold investments in China. Once you factor in geopolitical and other risks, it becomes a bad bet. China is retooling its economy toward a more controlled model focused on preserving regime power, and hardening itself against a more difficult geopolitical environment, even as it tries to attract investment.

Robin: The Chinese consumer is going to save the day, aren’t they?

Michael: I would not count on that. Their model is not prioritizing the consumer. It’s production-focused—they see the producer as king—and they repress domestic consumption. So where does all that production go?

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Taiwan remains central to Xi Jinping’s ambitions

Audience Question: What is China waiting for to take Taiwan?

Alexander: A landing operation, given the terrain, is very complex. If you want to force the Taiwanese leadership to negotiate reunification, you need to be very credible. China budgets for an error margin. It is not ready.

Part of the delay is also Russia’s experience in Ukraine, where the military appeared effective but in reality had deep weaknesses. If you look at procurement, logistics, and armaments in the People’s Liberation Army, the leadership recognizes there is fraud and inefficiency that still needs to be addressed. So they are not ready yet. My assessment is that this is more a threat than something they intend to do immediately.

Robin: And it’s important to remind ourselves that Taiwan has had two or three generations to prepare for this invasion, in terms of its military capabilities. Michael, what is Xi waiting for?

Michael: I would agree with everything Alex said. This is one of the most contentious forecasting questions in China analysis—”will they or won’t they, and on what timeline?” The U.S. intelligence community has revised earlier estimates, such as 2027, pushing them back. That may reflect political signalling.

There is strong consensus that Xi Jinping wants to incorporate Taiwan. If he’s able to, he wants to do it in his lifetime as part of his vision of national rejuvenation. He would prefer to do it peacefully through coercion—pressure, propaganda, political influence—rather than war. The strategy is to build overwhelming capacity—ships, missiles, landing craft—until Taiwan capitulates and the United States decides it’s not worth intervening. But to make that credible, China needs real capability.

Alexander: The key risk is timing. If Xi sees a window of opportunity—U.S. weakness, disunity among allies—he may act. The uncertainty is whether decisions are made through a structured process or a more centralized one.

Michael: There is still structured discussion within the Central Military Commission, even though it’s highly concentrated. (Joking)

Robin: Isn’t it striking that the Central Military Commission currently has only two members, effectively one in uniform?

Olivia: It is unexpected. On Taiwan, Xi has tied reunification to national rejuvenation by 2049–2050. The CCP is risk-averse, but Taiwan is a high-risk objective. So there is tension between short-term caution and long-term ambition. Taiwan is central to China’s vision. If China cannot achieve it, broader claims about its rise weaken.

At the same time, Xi’s rhetoric may increase urgency but also risks provoking counter-coalitions. Xi is risk-averse but has taken major risks—on the economy, COVID, diplomacy, and shifting toward the Global South. Taiwan fits into that pattern.

Chinese soft power as a tool of CCP influence

Audience Question: Soft power: is there space for it in the new world order?

Alexander: China is trying to exercise soft power on Russia, a society that does not have China as a reference point and has had anxiety about a rising China. But given current conditions—more flights, visa access, educational links—many Russians are visiting China for the first time. They come back impressed, seeing it as a country of the future. In some cases, this soft power works and attracts people.

Robin: Soft power as a tool of statecraft is obviously not a new phenomenon. But how important is it to China’s relationship with the rest of the world? And I don’t just mean things like CGTN or the resources spent on that, which are absolutely vast. But other aspects of Chinese culture—dance, theatre—are these things also a key part of trying to export a different view of itself to the world as it pushes for that preeminence?

Olivia: From a Xi Jinping perspective, the CCP is really central. So if we see that, then we are already ahead in thinking about Chinese soft power—being convinced about the CCP and its ability to generate attraction, which he does believe in.

But the other aspect about Chinese soft power is that it’s not just Chinese fans. It’s dancing robots, TikTok, RedNote—it is about the Chinese technology platform economy. What is interesting is these are also sectors that Xi Jinping regulates, and that the Chinese government finds need a lot of improvement, and finds them to be falling short of state expectations. But if you think about the spread of Chinese influence, they are a lot more effective than telling the rest of the world how amazing the Chinese Communist Party is. That would reach some audiences, but have a limited level of reach. But TikTok, dancing robots, electric vehicles—those can be Chinese soft power. So sustaining Chinese tech capability is actually really crucial to that.

Robin: Yeah, the problem with those is that they’re tools of the state, to an extent. I know there’s a huge amount of private financing involved, but in my view, China’s leadership is not willing to liberate the true leaders of soft power, and so will never let them achieve their full potential. And the potential is huge, isn’t it, Michael, for a country as vast, with such a history.

Michael: Absolutely. China has a highly educated population that produces all kinds of amazing things. It has enormous cultural resources to draw on to be appealing in many respects. The main damper on its appeal to the average person, and to many of its own citizens, is the authoritarian weight of the Party-state on it, the obsessive control, and many of its other nasty elements. The fact that it’s currently imprisoning about 50 journalists and about 4,000 political dissidents, and engaging in other extreme human rights violations—that’s not great PR, and it knows that.

That’s why you can’t really think of Chinese soft power as one discrete thing. The Party-state is quite good at engaging in a whole spectrum of influence tactics that range from state media to disinformation, misinformation, propaganda, and soft power influence through social media, to outright coercion.

A lot of the language it’s been using in meetings with leaders lately is that it wants foreign countries and governments to show a correct perception of China and demonstrate mutual respect. A “correct perception” means things like respecting China’s right to its own development model. However, that development model also involves a $1.24 trillion trade surplus that’s hollowing out Western manufacturing and preventing many Global South countries from climbing the ladder of development, because they can’t compete.

So it’s about strategic narratives that manipulate perceptions, hide and censor, downplay, or condition—through fear—people from saying critical things, and accentuate a positive, glorifying narrative. Often that acts in a very subtle way, particularly in Western societies.

The Party doesn’t need people to believe everything or think China is wonderful. It just needs them to be sufficiently confused, to stop countries from doing necessary things to protect themselves against hostile aspects of its influence—elite capture, foreign interference, transnational repression, and other malign activities—and from taking measures against aspects of its economic policy that are making countries dependent on China. So this soft power narrative is about lulling you into a false sense of security from thinking “it’s not that bad.”

There are great aspects of China, but you still need to protect yourself from the harmful aspects.

Can China be a peacemaker for Ukraine?

Audience Question: Is there a role for China as a mediator or facilitator of peace settlements in Ukraine, particularly if Trump walks away?

Robin: I think this is fascinating, given China’s de facto support for the aggressor. Olivia, what do you think about China as a global peacemaker?

Olivia: The Chinese government takes the view that it has scope to play a mediator role, but also stands for non-intervention, and that conflicts ultimately require the warring parties to sort things out. If the willingness is there, China would like to push things along a little bit.

But there isn’t an interest in providing security guarantees. China doesn’t want to be dragged into conflicts created by others, and it doesn’t provide security guarantees. Those are hard limits on how China would act in mediation. The interest is there, provided conditions are right, but China would not do too much to create those conditions.

Robin: Can you be a credible potential peacemaker if you’re supporting one side?

Alexander: The Chinese understand that the positions of the two sides are still miles apart, and both Russia and Ukraine have the capacity and will to continue fighting. That is the most likely trajectory this year, since neither is in a position to capitulate.

The outcome China would consider acceptable would also involve getting something out of it. A simmering conflict that drives Russia toward China on China’s terms and diverts U.S. attention and resources is acceptable. Why stop that?

China is not directly involved enough to incur major downsides. So if you want China’s help, there needs to be a price. That’s what China asks European interlocutors: what’s in it for us? Are you ready to do something in return? The answer is usually no, because these are core European interests. So China follows a path of imitative diplomacy: initiatives, “friends of peace” groupings, envoys traveling between capitals. They are very good at that. But they are not in a position to deliver peace, at least for now.

Olivia: China has been saying it can improve relations with Europe because Europe now recognizes China’s “principled neutrality” in the Ukraine war. That has been a Chinese narrative over the past year. From China’s perspective, its position has been successful. It does not want to pay a cost through serious mediation. This reflects the distinction between global hegemony and global preeminence: China is looking for leadership in a low-cost way.

That also means limits. For countries, that can be reassuring because China is unlikely to intervene militarily. But it raises a more difficult question: how do you harness China’s weight to deliver global public goods like peace when it is reluctant to do so?

At a time when U.S. leadership is retreating, Europe is squeezed in the middle. China is not fully stepping up, and the U.S. is creating uncertainty. So how do you create a workable framework for coexistence with China? That still needs to be thought through more clearly.

Audience Question: The Global South not being one bloc, could you elaborate on how countries navigate between China and the United States?

Alexander: China brings a lot to the table, especially in manufacturing and trade policy. The U.S., under Trump, also has an assertive trade policy, though not always welcome to those affected. Countries are trying to create space and engage both sides. China is more forward-leaning in offering opportunities, while the U.S. appears more defensive. Europe is trying to play a stabilizing role, but internal divisions and other pressures limit its effectiveness.

Robin: Olivia, what about India? Where does it sit?

Olivia: The Global South is a loose political concept in China’s framing. It refers to countries with shared grievances. China is flexible in defining partnerships, so India, and even Singapore, can be included if they identify that way.

Robin: China’s relationship with India is not easy—they compete.

Olivia: It’s not easy, but engagement is flexible. Countries can participate in some initiatives and not others. That makes China’s relationships both hard to define and easy to enter.

China’s role in the U.S.-Israel conflict with Iran

Robin: Olivia, why isn’t China doing anything about Iran? It’s an opportunity to be a peacemaker. Why not flag all the ships with a Chinese flag and come through the Strait of Hormuz?

Olivia: China is doing a lot. Beijing is talking to countries and engaging in diplomacy. From a business perspective, the concept is preeminence, which means seeking leadership without paying a heavy cost. This is a textbook example.

It is not surprising if you look at China’s approach to Ukraine, Iran, and after the October 7 attack. You see a consistent pattern. The question is whether China can persist with this low-cost approach. It has a tangible negative impact on the Chinese economy. Can China maintain a low-cost approach without paying a cost? The answer is no.

This is a real test for China. The question becomes what other countries China claims to be close to will pressure it to act collectively. Pressure on Chinese leadership exists, but what exactly the world wants China to do is unclear. Neither the West nor the Global South has articulated a clear answer. More work can be done here. I would be interested to hear what Michael has to say.

Robin: Michael, a war that distracts your main opponent may be good, but a war that could lead to regime change and more democracy in Iran might not be good for China. Is that right?

Michael: Whether the U.S.-Israel war with Iran is a net positive or negative for China is debated. The relationship is asymmetric: Iran is much more dependent on China. China can live without Iran, but it gets real benefits from the relationship. The question is whether those benefits would continue under a different regime in Tehran.

Right now, China is taking a position of calibrated ambiguity, criticizing U.S. intervention without confronting it. This follows the classic line: never interrupt your opponent while they are harming themselves.

On the negative side, China risks losing a strategic partner that provided discounted energy and kept the U.S. focused on the Middle East. The 25-year strategic partnership underperformed and never reached the $400 billion headline. Iran is less important for China economically than the Gulf states and Saudi Arabia, but it still matters.

U.S. military success also has a psychological impact. Chinese analysts have been struck by U.S. capabilities, which may influence thinking on Taiwan. China’s energy insecurity has also been exposed. It has strategic reserves, but they are not infinite. There is also the postponement of the Xi-Trump summit, which could affect broader relations.

On the positive side for Beijing, the U.S. is expending strategic munitions and advanced weaponry, potentially creating opportunities for China to make moves, including in the South China Sea. It also diverts U.S. resources. The situation supports China’s global narrative presenting itself as responsible while portraying the U.S. as destabilizing. Economically, higher energy costs create short-term inflation pressures for China. In the long term, however, higher fossil fuel prices could benefit China as a major supplier of green technology such as wind, solar, and batteries.

Robin: Strategically, if the Iran situation weakens Donald Trump, that could benefit China.

Alexander: I agree with much of the analysis, but I would not conclude that the U.S. has demonstrated total superiority. This is not the first Gulf War. Intelligence capabilities, especially from Israel, have been strong. If Iran can still disrupt shipping, and if resolution requires a large-scale operation with significant risks, it is not clearly a major success. If the war ends with U.S. withdrawal and a declared victory by Trump, that is not unfavourable for China.

China is active behind the scenes. Russia is more forward in providing assistance, which suits China because Russia absorbs more pressure. China is well hedged: its investments in renewables, coal, and diversification have been effective, and it has access to Russian hydrocarbons. This could be the moment China advances major projects and expands existing ones.

Audience Question: What lessons is the PLA learning from Iran? What does it take from Trump’s command of a powerful military, and from a capable force struggling in a conflict less complex than Taiwan?

Alexander: The U.S. has struggled to absorb lessons from Ukraine. Ukraine’s military has improved significantly with U.S. support, particularly in drone warfare. Weaknesses in airbase defence highlight vulnerabilities. China is likely studying how well its own defences would perform and what lessons apply to drone warfare. It also benefits from observing Russia, which is a major innovator in drone use in this conflict.

Robin: China leads in drone technology. The PLA has undergone significant professionalization and anti-corruption reforms under Xi Jinping. How much is it learning, and how different is it from 20 or 30 years ago?

Olivia: China is learning that Trump is unreliable. This affects any idea of negotiating over Taiwan, because there is uncertainty about how he would interpret or uphold agreements. That makes him both a risk and a potential opportunity, but not necessarily one China is eager to exploit.

The argument that 2027 is a likely timeline for action against Taiwan is not convincing. U.S. unpredictability creates risk China may prefer to avoid. Observing U.S. actions in Iran reinforces the perception that escalation carries high uncertainty. If China considers increasing coercion toward Taiwan or taking more aggressive action, it will factor in the risks demonstrated in Iran. This suggests caution rather than urgency.

On military and technological lessons, including drones and PLA capabilities, lessons exist, but they are not immediately translated into action. Xi Jinping operates on a long timeline focused on predictability, gradual adaptation, and course correction.

China has adjusted through outreach to Europe, export controls on rare earths, and calibrated signalling of capability. But there is no indication of a major move to exploit perceived opportunities created by U.S. behaviour under Trump. The Iran situation does not appear to be pushing China toward higher-risk action.

Cheap Chinese technology comes with strategic dependence

Audience Question: Is Europe’s absorption of Chinese green energy infrastructure, batteries, and EVs an opportunity? Could it be a win-win for Europe, enabling a quicker shift toward renewables?

Alexander: The right exercise for the Commission and nation states is to assess which industries are viable. Which still have the scale and profitability to remain competitive and should be protected? Which cannot be rebuilt or are already lost Large parts of green tech are gone and not where Europe should compete. The automotive sector is worth protecting. A one-size-fits-all approach does not work. Policymakers should evaluate industries individually, protect what matters, and lower costs by allowing China to dominate where Europe cannot compete.

Robin: Michael, the UK recently excluded Chinese wind turbine manufacturers on national security grounds. Meanwhile, the U.S. automotive sector finds CATL’s battery technology difficult to avoid and is being pushed toward partnerships because of its dominance. There are two sides to this.

Michael: In some areas, Chinese green tech offers a low-cost advantage where no local competitor exists. This benefits consumers and accelerates the green transition. But there are cybersecurity and national security concerns, as seen with wind turbines, electric vehicles, and telecommunications infrastructure.

Dependence on a strategic adversary for critical components creates vulnerability. It can be weaponized for coercion or conflict, and creates long-term strategic dependence. Even if products are not made in the EU, sourcing entirely from China introduces risk. China’s use of rare earths illustrates this.

This requires strategic industrial policy: deciding what to produce domestically while diversifying supply from trusted partners. There is also the problem of deindustrialization. Service-based economies may work nicely for highly-educated finance professionals, but for working-class people they limit upward mobility and deepen regional inequality.

A diversified economy matters. Losing manufacturing erodes process knowledge, production capacity, and the defence industrial base. It can also make production prohibitively expensive. Diversified commercial supply chains may be feasible, but limited domestic military production creates national security risks if competitors can scale much faster.

A CCP-led order would be state-centric

Audience Question: We’ve heard the view that China wants to see the post-World War II rules-based order hollowed out. But over the last two or three years, the West has done much of that itself. Given China’s pursuit of global preeminence, soft leadership, and soft power, how will it exploit that collapse to establish a new world order?

Robin: Michael, briefly, a New World Order?

Michael: That raises the question of what a Chinese-led or Chinese-dominated world order would look like. There’s not enough thinking about what kind of world China wants, or more precisely what kind of world the Chinese Communist Party wants.

It would be more realist, transactional, and power-based, leveraging China’s size to deal bilaterally with smaller countries. It would preserve parts of the rules-based order. China is not looking to eliminate bodies like the International Civil Aviation Organization or other standard-setting institutions. Rather, it wants discourse power, the ability to set standards through future technologies, make those technologies dominant, and exercise influence in bodies like WIPO or the FAO. That’s why it has placed senior officials in overlooked UN organizations over the last two decades.

China wants to preserve regulations where they provide regularity and predictability, but purge the liberal elements of the system: institutions of liberal economics, which it uses through the WTO and pays lip service to but does not follow, and anything related to human rights, good governance, democracy promotion, or values it sees as hostile to its own governance model.

This is a struggle between a Leninist vision and a Kantian vision of world order. Liberal democracies have not always practiced what they preached, but there has always been a liberal aspiration in that vision. A Chinese world order would be purged of that aspiration. It would be state-centric, with less room for independent media, civil society, the primacy of the individual, and civil and political rights.

Can the CCP deliver for China’s poorest?

Robin: Much of this depends on China’s domestic economic success. Xi Jinping has to sustain growth, or none of this works outside China’s borders. How challenging is the domestic economic problem?

Olivia: This brings us back to China’s 1.4 billion people, and whether they can become a real source of economic power. As Michael said earlier, China has not succeeded in harnessing its consumer market, and this remains a major problem in the 15th Five-Year Plan.

The plan mentions the need to boost consumption, but Xi Jinping is committing to a 7 percent annual increase in scientific research and development from 2026 to 2030, while there is nothing nearly as ambitious on consumption or the social safety net for lower-income populations.

At the same time, China is seeing an expansion of the gig economy and informal labour markets. Aging migrant workers who came from villages and worked in cities in the 1980s and 1990s are now too old for factory production lines, while the real estate sector has collapsed. Many have been absorbed into the gig economy, and they make up a large share of China’s workforce. What happens to them?

This points to a broader challenge: whether the Chinese Communist Party can live up to its promise of common prosperity. That may be necessary if China is to deliver the national rejuvenation Xi Jinping has promised.

It also raises the question of what the Chinese government will actually do to raise living standards for lower-income populations. Local government finances are severely squeezed, creating more unfunded mandates even as local governments bear much of the burden for social welfare provision. That is not sustainable.

So the difficult question is whether relentless investment in technology is the best path for China. From Xi Jinping’s perspective, it is strategic and tied to security. But from the perspective of China’s working class, the priorities may look very different.

Robin: I’m glad you touched on that, because for me China, its political leaders, and China’s people have always been very different things, and it is wise to keep them separate. Thank you.

My thanks to the Frontline Club and China Correspondents’ Club of London for organizing. Visit the Frontline Club for more thoughtful discussions with leading journalists, scholars, and practitioners on the major issues shaping world affairs.

Check out Olivia Cheung’s excellent books with Steve Tsang, The Political Thought of XI Jinping (video summary) and China’s Global Strategy under Xi Jinping.

Alexander Gabuev’s insightful writing for Carnegie is here. He also has a Substack.

Is there really forced labour in China? That was the question Canadian Member of Parliament Michael Ma appeared to be asking an expert witness during during a March 26 hearing of the House of Commons Committee on Industry and Technology about Canada’s recent agreement to allow imports of electric vehicles built in China.

The question matters far beyond Canada. Many companies and governments are grappling with how to assess and address political, human rights and environmental risks in PRC supply chains.

After cited a 2024 Human Rights Watch report about the specific risk of abuses in EV supply chains, Ma, a former Conservative MP who recently joined the governing Liberal Party, challenged her evidentiary basis by asking, “Have you witnessed forced labour in Xinjiang? Have you witnessed forced labour? Just a short answer—have you witnessed forced labour in Xinjiang, yes or no?” … “So did you get that from hearsay?” Further questions, such as whether Johnston’s China Strategic Risks Institute “specifically looks for risks when there isn’t one” seemed intended to challenge her credentials.

Frankly, that’s an unrealistically narrow evidentiary standard to apply to an extensively-documented human rights violation. Ma hasn’t explained why he behaved that way, but we can imagine it’s because the testimony was inconvenient to the government’s controversial import quota agreement—which was made despite prior evidence that current measures don’t adequately ensure that imported vehicles are free of forced labour or environmental violations. (The lithium in their batteries may be mined in Tibet.) Car-buyers need to understand that.

For the record, there is indeed forced labour in China, but the Party-state makes it exceedingly difficult for anyone to see it. The report Johnston cited describes PRC hostility to foreign carmakers’ human rights and responsible sourcing policies, and I can personally attest from travel through Xinjiang that the Party-state goes to great lengths to hide its shameful behaviour there. State Security has arbitrarily detained staff at firms that provide due diligence. Researchers have been subjected to sanctions, pressure and lawfare. PRC think tank Guancha published commentary celebrating and amplifying Ma’s harangue of Johnston.

Instances of slavery and forced labour can also be found in other countries. But the PRC situation is uniquely egregious because of its vast scale, central government coordination, and integration into global supply chains, which links violations directly to international production networks.

Forced labour in China involves state-directed labour transfer systems in which Uyghurs and other minorities are placed into industrial and agricultural work under coercive conditions that may include restrictions on movement, pervasive surveillance, and political indoctrination, with penalties for refusing to participate. Uyghurs are often transferred out of Xinjiang and into forced labour at the beginning of the Chinese automotive supply chain, in mining, smelting, basic materials, and small components that later end up in cars. Much of the evidence base necessarily comes from meticulous, inherently risky human-rights investigations, supply-chain analysis, satellite imagery, leaked government records, and survivor testimony, compiled by credible media, civil society organizations, academics, and UN rapporteurs. Multiple governments’ findings, including Canada’s own prior statements and legal measures under its import prohibition regime, support these conclusions.1

Relying on that body of evidence is a far cry from “hearsay”.

To understand why this debate matters for every country managing relations with China, read the following guest post by Vina Nadjibulla, Vice-President of Research & Strategy at the Asia Pacific Foundation of Canada. First published in Policy Magazine March 31, 2026.

The controversy around Liberal MP Michael Ma’s comments on forced labour in China is an early test of how Prime Minister Mark Carney’s China policy is being put into practice—and whether it can remain pragmatic without drifting into equivocation, accommodation or self-censorship.

Carney’s recalibration—toward a more interest-based approach aimed at stabilizing ties with Beijing while widening Canada’s options in a period of growing economic insecurity and overdependence on the United States—has clear strategic logic. In a world of coercive interdependence, middle powers need more room to manoeuvre.

China remains one of Canada’s most important economic relationships. And Canada has real interests in rebuilding relations with China in areas such as trade, energy, agriculture, and selective multilateral cooperation. Therefore, a more pragmatic, interest-driven approach is both necessary and overdue.

In Carney’s own Davos framing, pragmatism was meant to be paired with principle. His call for a “principled and pragmatic” foreign policy was rooted in the argument that middle powers must act with honesty and uphold values such as human rights, sovereignty, and territorial integrity. It was never intended to imply that, in trying to avoid friction with Beijing, Ottawa would begin to hedge on established facts, soften its language on documented human rights abuses, or narrow its own political space on issues such as Xinjiang and Taiwan.

Yet, that risk is already visible in how the government has responded to the issue of forced labour in China raised by Ma’s line of questioning. The public response from Ottawa was notable less for what it said than for what it avoided saying. Asked directly whether there is forced labour in China, Carney responded that there is child labour and forced labour “around the world,” adding only that there are “parts of China that are higher risk.” That formulation is not incorrect. But it marks a clear shift in tone from the Canadian government’s earlier, far more direct and focused language.

That earlier position was explicit as evidenced by a Global Affairs Canada backgrounder stating that “Canada is gravely concerned with evidence and reports of human rights violations” against Uyghurs and other minorities, including “forced labour within the Xinjiang Uyghur Autonomous Region, and mass transfers of forced labourers from Xinjiang to provinces across China.”

It also made clear that Canada’s forced-labour import prohibition “provides a basis for enforcement against goods produced by forced labour originating in or transferred from Xinjiang.” In briefings to Parliament as recently as 2024, senior officials continued to use similarly direct language, stating that Canada is “gravely concerned” by reports of forced labour and other human rights abuses in Xinjiang.

That clarity was backed by policy tools. Canada’s prohibition on importing goods produced wholly or in part by forced labour came into force on July 1, 2020, as part of its implementation of CUSMA labour obligations. Since January 2024, the Fighting Against Forced Labour and Child Labour in Supply Chains Act has added new reporting requirements for certain entities and federal institutions. Canada also introduced Xinjiang-specific business measures, including a Xinjiang Integrity Declaration and a business advisory warning firms about legal, reputational, and supply-chain exposure linked to Xinjiang.

This history matters. It shows that Ottawa’s earlier position was not vague or generic. It was explicit, and it was tied to concrete policy tools. The question now is whether it still has the political will to enforce them. That question is particularly important because Canada’s enforcement record so far has been modest. Since 2021, Canada has detained multiple shipments over forced-labour concerns, but only two have ultimately been blocked from entering the country after authorities determined they were produced with forced labour— both from China.

This is what makes the government’s recent statements so concerning. The problem is not merely that the rhetoric has changed. It is that it is changing in the wrong direction at precisely the moment when enforcement should be the priority. If Ottawa now prefers to speak about forced labour only in generic terms—as though Xinjiang were simply one example of a global issue rather than a specific, documented case the government itself has repeatedly identified—it risks softening the political will needed for stronger enforcement.

The risk of self-restraint is also becoming apparent in Ottawa’s approach to Taiwan. While Canada’s formal policy has not changed, recent decisions suggest a heightened sensitivity around actions that might invite Beijing’s displeasure. In January, Liberal MPs were advised to cut short a visit to Taiwan, and a long-negotiated trade facilitation agreement with Taipei remains unsigned. Taken together, these developments point to a growing caution in Ottawa’s approach to Taiwan—one that risks narrowing Canada’s room to manoeuvre.

That caution may be tactical. But the broader danger is that, in the name of improved relations with Beijing, Ottawa begins to limit its own flexibility—on human rights, on Taiwan, on investment scrutiny, and on the broader terms of economic engagement with China. Beijing, for its part, is unlikely to interpret such restraint as diplomatic sophistication. It is more likely to see it as evidence that pressure works—that the more Canada self-censors, the more room there is to demand further restraint.

This is not the time to loosen guardrails, waver in enforcing Canada’s economic security tools, or soften clarity on the principles and human rights concerns that should underpin them. If Canada is going to do more with China—including in strategically sensitive sectors such as EVs—it needs more clarity and more enforcement, not less.

Carney’s January visit to China established a series of mechanisms meant to institutionalize and deepen cooperation, and Minister François-Philippe Champagne’s visit this month to advance the finance and economic dialogue is part of that effort. The more robust economic engagement becomes, the greater the need for clarity and guardrails.

If Ottawa is serious about expanding trade and investment with China, it must be equally clear about the conditions under which it is prepared to do so. What kinds of Chinese investment does Canada actually want—and in which sectors? What screening mechanisms will apply? How will Ottawa distinguish between commercially beneficial engagement and strategically sensitive exposure? And how will it ensure that deeper economic ties do not blur critical lines on research security, infrastructure, sensitive technologies, and supply-chain integrity?

These are not secondary questions to be worked out later. They go to the heart of what kind of relationship Canada is now trying to build with China. The message Ottawa should be sending is straightforward: Canada is prepared to engage China where interests align, but it will also speak plainly about human rights abuses, uphold its legal obligations, and enforce its own rules with greater seriousness.

We should also be realistic about what is possible in our relationship with China. Some friction with Beijing is not a failure. It is inevitable. Indeed, it is the price of having a China policy that reflects Canadian choices rather than Chinese preferences. A mature China policy is not one that avoids friction. It is one that can absorb it—while remaining clear-eyed about where Canada’s interests lie, where its laws apply, and where its principles still have to hold.

Carney’s China recalibration has strategic logic. Its success will ultimately be measured by whether Canada can do two things at once: engage China where interests align, and hold the line where Canadian values, laws, and strategic interests require it. The challenge for Ottawa is not simply to stabilize relations with Beijing, but to do so without slipping into self-censorship, equivocation, or quiet accommodation. That is the real test now underway.

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German Chancellor Friedrich Merz told his parliament on March 25 that he could envisage a trade deal with China. The talk is unlikely to lead anywhere. But together with his February 25–26 visit to China, which did more to advance the Chinese Communist Party’s interests than Berlin’s, it illustrates that many European elites still lack a strategic understanding of the multidimensional challenge China poses to their security and prosperity.

Ahead of the Chancellor’s meetings in Beijing, Germany had explicitly rejected Chinese pressure to support an EU-China free trade agreement. Merz’s own officials described the FTA push as an attempt to lock in Chinese market access before the EU’s “Made in Europe” debate reached legislative conclusions. He held the line in Beijing. Then he volunteered a softened version of it four weeks later, unprompted, in the Bundestag. The European Commission immediately pushed back, saying Beijing must “meaningfully” address its distortive practices before any such talks could begin. Meanwhile in Australia, Commission President Ursula Von der Leyen warned that the EU “cannot and will not absorb China’s export-led growth model.” The dissonance between Berlin and Brussels is now explicit and on the record.

Updated April 7, 2026. This is Part II in a series of posts about Germany-China relations. Read Part I:

Merz in Beijing

Merz arrived in Beijing on February 25 with a more credible brief than either Mark Carney or Keir Starmer. He hadn’t spent months signalling desperation to get into the Great Hall of the People; he brought no expectation of a reset; and German officials had explicitly drawn a line between Merz’s approach and what they termed Sir Keir’s “Starm offensive.” The visit, they insisted, was not a rejection of Washington or an endorsement of Beijing’s self-serving narrative about Western leaders queuing up to acknowledge Chinese leadership of a new world order. Still, that sensible pre-visit positioning didn’t prevent the Chinese Communist Party (CCP) from getting most of what it actually wanted. The substance was meager. The optics favoured China.

The signed deliverables were five documents covering climate cooperation, animal disease prevention, poultry products, and sports collaboration. If we were counting pieces of paper, that compares poorly with twelve for Starmer and eight for Carney, but that’s not a meaningful metric. The key point is that the joint statement acknowledged bilateral concerns over trade imbalances and export controls and pledged “frank and open dialogue,” but committed Beijing to nothing. China has offered the same platitudes to every European visitor who preceded Merz. Merkel raised overcapacity. Scholz raised the trade deficit. Both got joint statements pledging frank dialogue. The relationship’s “durability” is not evidence that the framework is working, but rather shows that Germany keeps returning to the same table and Beijing keeps serving the same meal. Articulating a problem clearly while securing no commitment to address it is painfully incremental progress.

The headline outcome Merz chose to trumpet was an Airbus order for “up to 120 additional aircraft.” Six weeks later, there’s no confirmation about this announcement and the lack of specificity has led to some confusion. After French President Emmanuel Macron’s visit last year, Air China signed a contract for 60 A320neos dated December 30, 2025. Four weeks after Merz’s visit, China Eastern reportedly placed a firm order for 101 A320neos. While I haven’t seen confirmation these are the same planes, it seems likely that by signalling an Airbus order to Merz at a state dinner rather than letting it surface quietly through a stock exchange filing, General Secretary Xi Jinping gave the chancellor something to wave at reporters. But let’s be clear, this is routine fleet modernization, not a new political gift. At least 53 of China Eastern’s existing A320s are due to retire on lease expiry or serviceable age during 2028–2032, so more than half the order is straight replacement. The airline needs these planes regardless of who visits China. What the Party-state controls is the timing of the announcement.

It’s the same tool for each politician: 60 jets for Macron, 101 for Merz, and next Donald Trump reportedly will have a chance to announce an order for “up to” 500 Boeing 737 MAXs which the CCP has been holding in reserve since 2019 trade tensions so it can be deployed at the moment of maximum diplomatic utility. That carrot could be withdrawn, of course. Beijing has been using aircraft orders as diplomatic currency since 1972, when it placed its first Boeing order weeks after President Richard Nixon’s visit. Costuming commercial procurement as a concession—with reciprocity expected—is a 50-year-old playbook. Give the political children some candy and they won’t challenge you on the important things.

Germany’s government also confirmed that bilateral government-to-government consultations, suspended since the pandemic, would resume, potentially by the end of 2026. That’s an easy win—both sides wanted it.

More significant is what Merz did not secure: meaningful movement on the €90 billion trade deficit, substantive commitments on rare earths and critical mineral export controls (German companies are still receiving only a fraction of what they ordered even under the “general licenses” arrangement which allows for multiple shipments of these materials per year), or any credible Chinese undertaking to reduce support for Russia’s war in Ukraine. Xi was polite about Ukraine, but his support for Moscow’s war machine has only deepened, and there is no reason to believe that Merz’s polite entreaties at a state guesthouse dinner registered as pressure.

Quick context in this one-minute Deutsche Welle video:

The Munich-Beijing narrative gap

The most telling indicator was the distance between what Merz said at the Munich Security Conference weeks earlier and what he said in Beijing. At Munich, he accused China of “systematically exploiting the dependencies of others” and described raw materials, technologies, and supply chains as “instruments of power in the zero-sum game of the great.” In Beijing, the same trade deficit became merely one of “a number of challenges that we want to, and certainly can, overcome together through cooperation and dialogue.” This smacks of accommodation dressed as engagement.

The language regression extended beyond tone. In an echo of Mark Carney’s promotion of a revived strategic partnership, Merz likewise spoke of the two countries’ “comprehensive strategic partnership.” Under Chancellor Scholz, German diplomats had deliberately retired that phrase as an obsolete relic of the Merkel era. Merz also declined to call China a “systemic rival”—the term that his own coalition agreement and Germany’s 2023 China Strategy use to define the relationship. These are not minor formulations. The CCP reads official vocabulary carefully, and Merz handed it a revival of the framework it’s always preferred.

The cooperative register was almost certainly unavoidable given the diplomatic context of a first meeting, and Merz’s private conversations may have been more direct than his public statements suggest. But for propaganda purposes, Beijing doesn’t distinguish between the register of private complaints and public statements—it reads and amplifies the public signal, and the public signal was conciliation. Meanwhile in Berlin, Finance Minister Lars Klingbeil warned against “slavishly maintaining market openness” while competitors ignore the rules. I’d like to think the contrast was a masterful good-cop/bad-cop strategy, but I suspect it was just incoherence.

The CEO problem

In Beijing, after Merz criticized Chinese trade policy, he rode in a Mercedes-Benz S-Class the next day while the company’s CEO extolled China’s innovation ecosystem, the New York Times reported, illustrating the structural contradiction. The 30+ CEOs who accompanied Merz were largely not there to reinforce his agenda. They went to conduct their own parallel diplomacy to signal to Beijing that German capital remains committed regardless of the chancellor’s complaints about subsidies and overcapacity. Volkswagen Group China’s CEO posted online that “anyone who is serious about driving transformation in key sectors cannot look past China.” Mercedes CEO Ola Källenius had already told the Times in Stuttgart that the Trump administration had not changed his investment calculus.

Elite capture? Res ipsa loquitur. China-critical voices from German industry weren’t even given prominent speaking roles at the business forum Merz co-chaired with Premier Li Qiang, Noah Barkin reports. The trip’s format actively elevated the pro-engagement voices over the critics. This pattern is not unique to Germany. Of the dozen leaders who have visited Beijing in 2025 and so far in 2026, nearly all arrived with large business delegations—roughly 200 with South Korea’s Lee Jae-myung, 80 with Macron, 60 with Starmer. Their firms are deeply enmeshed in China and want political top-cover for business to continue as usual. Their interest is to constrain moves that could sour relations, even at the expense of ceding enduring advantages and sovereignty— for example by locating growing shares of R&D and production in China.

Some commentators treat this business engagement as strategically meaningful. Zhejiang University professor Shen Wei, writing in the South China Morning Post, argued that Merz’s Hangzhou itinerary showed German firms understand that “maintaining long-term competitiveness requires direct engagement with Chinese innovation ecosystems.”

This is a legitimate business argument. But it conflates two distinct things: the commercial logic of individual firms protecting their market positions, and Germany’s strategic interest as a state.

The firms that invested most deeply in China’s innovation ecosystem (VW, BMW, BASF) are precisely the ones that transferred technology, built local supply chains, and are now watching Chinese competitors take their market share in third countries while lobbying Berlin against protective measures. “Engaging the innovation ecosystem” is how Germany deepened the dependency in the first place. Good for China. Not good for Europe.

The result is a structural trap: Germany sends its biggest companies to Beijing as political cover for a diplomatic visit; those companies use the trip to advance their own commercial interests; and the CCP reads this as confirmation that whatever the chancellor says about de-risking, the people who actually control Germany’s China exposure are still all-in. German FDI in China hit a four-year high in 2025, precisely during the period when Merz was campaigning on derisking. As MERICS executive director Mikko Huotari put it, the danger is “re-risking instead of derisking.”

How Beijing used the visit

The CCP wanted three things:

1. The visual of yet another Western leader in the Great Hall—added to the sequence of Macron, Lee, Carney, Starmer, and several others—to neutralize any perception of Beijing being isolated for bad behaviour.

2. An implicit German endorsement of the “stabilizing anchor” frame: the idea that the China-Germany relationship is a moderating force in China-EU relations, blunting the EU’s more assertive trade defense measures. A Global Times editorial, headlined “Merz’s China Travel freshens Europe’s perception of China,” made the subtext explicit, praising Merz’s commitment to “free trade and rejecting protectionism” and expressing hope that his “pragmatic approach will help foster a more balanced EU consensus on China.”

3. A counter-narrative to the “stolen technology” and “state-subsidized overcapacity” frames. The Hangzhou robot factory tour served this purpose deliberately. Merz delighted in watching humanoid robots perform martial arts and boxing and posted clips on social media; European media duly covered it as evidence of Chinese innovation rather than subsidized industrial policy.

The Party-state didn’t immediately get everything it wanted from the visit. The FTA push was rejected. German officials also declined Chinese requests for an MOU reviving the Merkel-era Comprehensive Agreement on Investment (CAI) and a joint statement endorsing Xi’s Global Governance Initiative. These were meaningful holds. But little more than a month later, Merz’s rhetoric is already softening them.

Merz decides not to decide

Merz’s domestic framing had more credibility than Carney’s or Starmer’s. He wasn’t claiming a breakthrough he hadn’t achieved. He raised the necessary thorny issues—subsidies, currency policy, overcapacity, rare earths, Ukraine—and secured a modest process gain on government consultations. He may have drawn on his Beijing impressions when he met Trump in Washington on March 4, to signal that Germany has options and cannot be browbeaten into full decoupling. But as Fudan University’s Song Luzheng observed, any bargaining chips gained from Beijing are “very limited, given Germany’s reliance on the US for security and energy.” And with Trump now preparing his own visit to Beijing in May—following the US-China trade truce secured in South Korea in October—Europe faces the risk of a bilateral US-China accommodation that could leave it exposed on both fronts simultaneously, without having resolved its own China dependencies first.

GMF’s Mareike Ohlberg put the overall balance most precisely: the trip “suggests that Germany will continue to try to muddle through on its policy toward Beijing by avoiding decisive action.” The deeper problem is structural. Germany voted against EU tariffs on Chinese electric vehicles. The Chancellery has historically blocked tougher China proposals from Berlin’s own ministries. Crucially, unlike France, Germany brought no European Commission representatives to its bilateral meetings with Chinese leaders, effectively sidelining the EU framework and reinforcing Beijing’s divide-and-conquer approach to the continent.

This divide is now operating in the open. A Franco-German working group on China policy, set up late last year, has become bogged down in differences over trade measures. France’s advisory body to the prime minister has published a report calling for an across-the-board 30% tariff on Chinese goods. The Chancellery’s deep-seated aversion to trade barriers is blocking movement at precisely the moment France is pressing hardest for EU-level action. The Commission, meanwhile, is moving in its own direction: it adopted new anti-dumping tariffs on Chinese ceramics in February, with further measures covering e-bikes, auto parts, and tires reportedly under discussion. The EU’s trade defence architecture is being built around Germany’s hesitation, not with it.

Shen Wei frames Germany’s bilateral approach as a “blueprint” for the rest of Europe. This inverts the actual dynamic. Conducting negotiations without Commission representation, resisting EU-level trade defence instruments, softening hawkish positions from other member states: this is not a template for European coherence. It’s the mechanism by which European coherence is prevented. Shen defines success as a stable, functional bilateral relationship with managed tensions and open channels. Held against the actual structural problem—a €90 billion trade deficit, deepening industrial dependency, €7 billion in German FDI flowing into China in 2025 despite a domestic manufacturing crisis, and continued Chinese material support for a war on European soil—that standard yields a verdict of managed decline rendered comfortable enough that nobody is forced to act. It’s boiling the frog.

The CCP pits multinationals vs nationals

The test Noah Barkin identified before the visit remains the correct one: the concrete actions Merz takes afterward matter more than anything said in Beijing. As he notes, “the focus of the German government has been on ‘running faster’ by reducing bureaucracy. This strategy will fail if not complemented by more forceful measures to shield domestic industry.” The FTA comment in parliament suggests that Barkin’s test is already being answered in the wrong direction.

Merz has proposed a “Made with Europe” formulation rather than “Made in Europe”—a compromise that suggests he’s already begun accommodating the multinationals’ objections. The auto component suppliers being squeezed out of existence need “Made in Europe” requirements. The multinationals pursuing a “Made in China” strategy are lobbying against them. Merz needs to decide whose Germany he is governing.

Merz has the rhetoric. The question is whether the structures that captured his predecessors will capture him too—not because German politicians are corrupt, but because the system they govern was built to make exactly this kind of choice inevitable. That’s why, even though Beijing has changed nothing, Berlin is talking about strengthening what it calls a “partnership.” Codependency is a more accurate description. Centre for European Reform economist Sander Tordoir told Bloomberg: “As long as Europe depends so heavily on China, it is understandable that the German government wants to avoid escalation. The question is whether the de-risking that this buy-time strategy aims to deliver is moving fast enough.”

My answer is nein. In Part III we’ll explore why that matters for Europe, the West and ultimately the Rest, too.

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Dive deeper

“Can anything halt the decline of German industry?” Financial Times, 12 Nov 2025

Brad Setser, “China’s Massive Surplus is Everywhere (Yet The IMF Still Has Trouble Seeing It Clearly)”, Council on Foreign Relations, 12 Nov 2025

SCMP video: Balancing trade and economic rivalry: the future of Sino-German relations

Prime Minister Mark Carney’s recent tour of India, Australia, and Japan was more than a series of diplomatic engagements. It was the first real test of the foreign-policy vision Carney outlined in his global-milestone Davos speech: that in a more fragmented and uncertain world, middle powers like Canada must diversify partnerships, strengthen economic resilience, and work more closely with like-minded countries.

A guest post by Vina Nadjibulla, Vice-President of Research & Strategy at the Asia Pacific Foundation of Canada. First published in Policy Magazine March 15, 2026.

The choice of destinations—India, Australia, and Japan—was deliberate. Each is a major Indo-Pacific power, a critical democratic partner, and an increasingly influential actor in shaping the region’s political and economic order. Each is also confronting the same strategic dilemma Canada faces: how to preserve strong and constructive ties with the United States while building greater economic resilience and strategic agency in a more volatile global environment and amid growing uncertainty about U.S. policy.

Taken together, the three visits highlight an important nuance in Carney’s emerging foreign policy. Conversations in India, Australia, and Japan made clear that Canada’s Indo-Pacific partners are not embracing a narrative of rupture with the United States.

For most countries in the region, the goal is not to replace the United States but to hedge against uncertainty while maintaining a strong American presence in the Indo-Pacific. This is particularly true for Japan and Australia, whose security strategies remain firmly anchored in their alliances with Washington. Both governments see sustained U.S. engagement as essential to maintaining the regional balance of power, particularly in the face of China’s growing military and economic influence.

In that context, deeper cooperation with Canada—and with other capable middle powers—is seen not as an alternative to the United States but as a way of reinforcing a broader network of partnerships that can support regional stability.

The same logic ultimately applies to Canada. Geography, economics, and security realities make a fundamental rupture with the United States neither feasible nor desirable. The United States will remain Canada’s most important ally and trading partner for the foreseeable future. At the same time, that dependence leaves Canada highly exposed to shifts in U.S. trade policy and domestic political dynamics.

Diversifying partnerships—particularly in the Indo-Pacific—is therefore both an economic necessity and a strategic hedge. It is an effort to build greater resilience and policy flexibility, not a project aimed at replacing the United States.

Seen through that lens, Carney’s Indo-Pacific diplomacy is best understood as an effort to strengthen Canada’s strategic autonomy and another example of middle powers working more closely together while still operating within a U.S.-anchored security framework.

Carney’s tour produced tangible outcomes: progress on trade negotiations, new partnerships in energy and critical minerals, expanded defence and security cooperation, and agreements on emerging technologies and investment flows.

Yet each stop also served a slightly different strategic purpose.

India: A pragmatic reset

India was the most politically significant stop and received the most mixed coverage at home. Relations between Ottawa and New Delhi had deteriorated sharply after the diplomatic crisis of 2023. Carney’s visit marked a deliberate effort to turn the page on that chapter in the relationship and rebuild a partnership that both countries increasingly recognize as strategically important.

In a speech in Mumbai, Carney framed his visit as “The end of a challenging period in the relationship and the beginning of a new, more ambitious partnership between two confident and complementary countries.” He described Canada and India as “natural partners” and emphasized that repairing the relationship required sustained engagement across both a security track and an economic track. In that speech, Carney also drew a notable distinction between Canada’s approach to India and its more cautious recalibration with China. He noted that Canada sees cooperation with India extending into defence, artificial intelligence, quantum technologies, and emerging industries—areas that are not part of Canada’s current dialogue with Beijing.

The visit culminated in the adoption of a Leaders’ Joint Statement outlining a roadmap for renewed cooperation across trade, energy, defence, technology, and people-to-people ties. Taken together, these commitments articulate the most ambitious vision for Canada–India relations in recent years, laying out a broad and aspirational framework for elevating the partnership to a more strategic level.

The two governments also formally launched negotiations toward a Comprehensive Economic Partnership Agreement (CEPA), setting an ambitious target of concluding a trade deal by the end of 2026—ideally in time for the December G20 Summit in Miami. In parallel, the two sides agreed to pursue additional agreements covering critical minerals cooperation, digital trade, and investment facilitation.

Energy cooperation featured prominently during the visit. Canada and India committed to expanding collaboration across renewable energy technologies, nuclear energy, and critical minerals development—areas where Canada’s resource base aligns closely with India’s rapidly growing energy and industrial demand.

Commercial engagement accompanied the diplomatic announcements. Canadian and Indian companies unveiled billions of dollars in commercial agreements spanning a uranium deal, energy infrastructure, mining, and technology sectors. Canadian universities also signed thirteen memoranda of understanding with Indian partners, expanding research collaboration and student mobility as part of a broader talent and innovation partnership.

The economic logic of the relationship is compelling. India is one of the world’s fastest-growing major economies and a future powerhouse of energy demand, manufacturing capacity, and digital innovation. For Canada, it represents both a vast market and a strategic partner in sectors such as clean energy, artificial intelligence, agriculture, and education.

This reset also carries broader strategic significance for Canada’s Indo-Pacific strategy. India is increasingly central to the emerging economic geography of the region—positioning itself as both a manufacturing hub and a major destination for energy and infrastructure investment. For Canada, deeper engagement with India helps anchor its diversification strategy across several key sectors simultaneously: energy exports, critical minerals supply chains, digital technologies, and education partnerships. If managed carefully, this partnership could become one of the central economic pillars of Canada’s Indo-Pacific engagement.

Despite the breadth of outcomes announced during the visit, the reset remains fragile. Public opinion in Canada reflects lingering hesitation. A recent Asia Pacific Foundation of Canada-Angus Reid Institute survey found that while more than half of Canadians believe Carney’s trip to India came at the right time, attitudes toward India remain cautious following the tensions of recent years.

Rebuilding trust will therefore be essential if the relationship is to move forward. Security and law-enforcement dialogue between the two countries must demonstrate tangible progress if the broader economic, energy, defence, and educational partnerships are to develop. Without that foundation, the diplomatic momentum generated by the visit will be difficult to sustain.

Australia: Shining a spotlight on a trusted partnership

If India represented a reset, Australia represented consolidation. Canada and Australia already share deep institutional ties and remarkably similar political and economic structures. Often described as “strategic cousins,” the two countries share close alignment on democratic values, open-market economic systems, and support for a rules-based international order. Both are resource-rich middle powers with globally integrated economies and strong interests in shaping secure supply chains and resilient economic networks.

Yet despite these similarities, the relationship has often been somewhat overlooked—largely a function of geography and the fact that both countries have traditionally focused their diplomatic attention elsewhere. Carney’s visit helped place a well-deserved spotlight on this partnership and signalled Ottawa’s intention to elevate the relationship and develop deeper institutional ties with Canberra as part of its broader Indo-Pacific strategy.

The visit focused on expanding cooperation across several strategic sectors, including critical minerals supply chains, defence technology, artificial intelligence, and investment coordination. The two governments announced new initiatives aimed at strengthening economic security, defence and technological partnerships, and industrial resilience.

Critical minerals cooperation was particularly emphasized. Canada and Australia together hold a substantial share of global reserves of minerals essential to energy transition technologies and advanced manufacturing. Coordinating production, investment, and processing capacity could strengthen both countries’ positions in supply chains increasingly shaped by geopolitical competition and industrial policy.

Defence and security cooperation also featured prominently during the visit. Ottawa and Canberra committed to expanding joint military exercises, strengthening maritime cooperation in the Indo-Pacific, and deepening collaboration in cybersecurity and defence innovation. These initiatives reflect the growing recognition in both capitals that middle powers must work more closely together to help maintain regional stability and support an open maritime order.

Carney’s address to Australia’s Parliament—the first such speech by a Canadian prime minister in nearly two decades—further underscored the strategic convergence between the two countries and the importance Ottawa attaches to the partnership now.

Looking ahead, the potential for Canada–Australia cooperation extends beyond bilateral initiatives. Both countries could benefit from working more closely across the Indo-Pacific, particularly in Southeast Asia. Expanded coordination through minilateral partnerships—whether in areas such as maritime security, infrastructure development, or critical minerals supply chains—could allow Canada and Australia to combine resources and expertise in ways that strengthen regional resilience and support emerging economic networks.

The Australia–Canada–India Technology and Innovation (ACITI) Partnership, focused on cooperation in artificial intelligence and digital technologies, could serve as a useful model for other interest-based minilateral partnerships among like-minded countries across the Indo-Pacific.

Japan: Anchoring Canada in the Indo-Pacific

The final stop of the tour—Japan—was brief but impactful. Carney became the first foreign leader hosted by Prime Minister Sanae Takaichi following her landmark election victory. The visit produced one of its most strategically significant outcomes: the elevation of Canada–Japan relations to a Comprehensive Strategic Partnership.

Japan is arguably Canada’s most consequential partner in the Indo-Pacific. It is Canada’s second-largest Asian trading partner, a major source of foreign investment, and one of the most influential actors shaping the region’s economic and security architecture.

Economic security and supply chain resilience were central elements of the visit. Both governments agreed to deepen cooperation in critical minerals, clean energy technologies, semiconductors, AI, and advanced manufacturing supply chains. These initiatives build on Japan’s growing investments in Canada’s energy, mining, and infrastructure sectors and reflect Tokyo’s interest in securing stable and diversified supply chains for the industries that underpin its economy.

The automotive sector featured prominently in the discussions as well. Japanese automakers have long been among the largest investors in Canada’s manufacturing base, and both sides emphasized the importance of maintaining open and predictable trade conditions for the North American auto market. Japanese policymakers are watching closely as Canada and the United States approach the next review of the Canada–United States–Mexico Agreement (CUSMA). For Tokyo, continued access to a stable and integrated North American market remains an important priority.

Security cooperation was another key focus of the visit. Canada and Japan committed to strengthening maritime cooperation in the Indo-Pacific, expanding naval exercises, and deepening Coast Guard collaboration. These efforts reflect a shared interest in maintaining stability in the region’s sea lanes and strengthening maritime domain awareness.

While middle-power cooperation was a central theme of Carney’s Indo-Pacific tour, the strategic context shaping the Canada–Japan relationship inevitably includes both China and the United States. Japan remains deeply anchored in its alliance with Washington and sees sustained American engagement as essential to regional stability. At the same time, Tokyo is actively strengthening partnerships with other democratic middle powers as part of a broader effort to reinforce the regional order. In that environment, Canada is seen as a valuable partner.

For Ottawa, closer cooperation with Japan anchors Canada more firmly within the Indo-Pacific’s evolving strategic architecture. For Tokyo, Canada offers a trusted partner with significant energy resources, technological capabilities, and shared strategic interests. The elevation of the relationship to a Comprehensive Strategic Partnership reflects that convergence.

An Indo-Pacific moment Canada must seize

Prime Minister Carney’s Indo-Pacific tour reset a critical relationship with India, strengthened cooperation with trusted partners such as Japan and Australia, and—perhaps most significantly—raised Canada’s profile across a region that will play a decisive role in shaping the global economy and strategic landscape in the decades ahead.

Canada’s current visibility in this region presents a real opportunity—one that will require sustained effort to capitalize on. Ottawa will need to address several structural constraints that have historically limited Canada’s engagement with the region. Export infrastructure remains insufficient to support large-scale energy and resource flows to Asian markets. Regulatory processes continue to slow investment and project development. Within government, Asia expertise (especially on India) and institutional capacity remain uneven. And perhaps most importantly, Canada has struggled to sustain follow-through after moments of high-level political engagement.

The task ahead will be to ensure that this political momentum is matched by sustained institutional and whole-of-society engagement. Canada’s moment in Asia has arrived. The challenge now is to turn it into a lasting strategic presence rather than another fleeting diplomatic win.

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This extensive Indo-Pacific diplomacy suggests Canada’s PM is serious about turning his vision into reality. To understand the opportunities and challenges the “Carney Doctrine” is likely to encounter, read these:

The Carney Doctrine Can Be More Than a Davos Speech
Middle powers need real institutions to resist superpower gravity.
by Michael Kovrig, Foreign Policy, February 18, 2026

Strategic Choices for Middle Powers Navigating U.S.-China Competition
by Stephen R. Nagy, APFC, February 25, 2026

On Canada-India and Canada-Japan relations, read:

Advancing Canada-India Trade: Why a Comprehensive Economic Partnership (CEPA) Matters, APFC, March 2026

With New Landmark Partnership, Canada and Japan Expand, Redefine Co-operation by Sun Ryung Park, APFC, March 16, 2026

In December, I gave an interview to German business newspaper Handelsblatt about the challenges of dealing with an increasingly totalitarian and coercive Chinese Communist Party and the Second China Shock’s impact on Germany’s economy. Earlier this month, Munich’s Südedeutsche Zeitung also did a Q&A with me on those topics. This is the first of three posts expanding on those interviews to explain the existential crisis in Germany-China relations and offer solutions.

German Chancellor Friedrich Merz this week joins the procession of Western leaders making official visits to China while facing a dreierwette (trifecta) of aggressive imperialism from Russia, geopolitical uncertainty from “America First” and hegemonic mercantilism from the Chinese Communist Party. Call it the Zeitenwende on steroids. Here we look at that third fracturing industrial leg of the broken tripod that once ensured Germany’s prosperity and what the Chancellor needs to do in Beijing and Hangzhou this week.

Merz arrives in China as an Atlanticist Realist bound by security dependence on the U.S. and political dependence on key German businesses, which are themselves bound in dependence on China. He’s seeking to de-risk without rupture while hardening Europe’s posture through EU instruments, all while shepherding the largest German business delegation since Angela Merkel was chancellor. The itinerary includes the first bilateral industry forum since 2018, and the first bilateral dialogue forum for politicians and scholars since 2019. Despite this seemingly normal diplomacy, there will be elephantine problems in the room during these discussions.

BLUF: Germany’s industry is losing revenue and market share in China, being undercut by Chinese firms in third markets it once led in, and simultaneously becoming more dependent on Chinese inputs and raw materials. It’s a triple whammy, and there’s nowhere to go but down. Oh, and China’s also supporting Russia’s invasion of Ukraine and covert aggression toward Europe, which is costing Germans hundreds of billions of euros. Merz needs to fix all this or watch his country’s fortunes decline precipitously.

Last year China ran a breathtaking record $1.2 trillion trade surplus. Germany’s taking that surplus on the chin, and its geoeconomic plight is worse than most people realize. Europe’s once-mighty export titan is now in an economic mess. If you’re not familiar with the economics of the Second China Shock, my post below sums it up:

China is destroying Germany’s industry

Twenty years ago, I helped Daniel Rosen research an article titled “How China is Eating Mexico’s Lunch”. The PRC has spent the intervening decades moving up the value chain to feast on Germany’s dinner. Dan’s Rhodium Group has some painfully clear graphs illustrating what this looks like in a new note, “Germany’s ‘China Shock’ Revisited”.

There’s an old Chinese saying that encapsulates the dynamic now: 一山不容二虎 (yì shān bù róng èr hǔ)—one mountain cannot accommodate two tigers. And the PRC wants Germany’s spot atop the industrial mountain.

Germany’s Federal Foreign Office describes China as the country’s most important trading partner, but that’s not necessarily a good thing. Simply put, Germany is buying far more from China than it’s selling. The country now runs a €90 billion trade deficit with the Middle Kingdom, which The Economist helpfully notes equals a “head-spinning 2% of German GDP.”

Germany has been running a goods trade deficit with China for well over a decade. A key inflection came in 2020 when two core industrial sectors, autos and machine tools, became net importers. Car exports plunged by nearly 70% between 2022 and 2024 as China’s domestic production ramped up, and last year, the German Economic Institute (IW) calculates, they fell a further 33% compared to 2024, while metals, machinery, electricals, pharmaceuticals, and chemicals all declined about 10%.

Meanwhile, China’s subsidized industrial goods and EVs are gutting German manufacturers in their own domestic and third-country markets. That’s coming at the expense of production in Germany, where auto worker layoffs are now running at rates steeper than during the 2008 financial crisis or the pandemic. Layoffs averaged at least 10,000 per month in 2025, Destatis data indicates. The engineering lobby, VDMA, reports that machinery sector employment fell 2.4% last year. Over 200,000 Germans have lost well-paid manufacturing jobs since 2019, GPPI Director Thorsten Benner notes, and with at least as many at risk.

This decline is not cyclical. Rhodium describes it as structural decoupling. Germany’s growth forecast for 2026 is under 1%. As a Bloomberg story recently put it, the country is “ground zero of the changing terms of trade with Beijing.”

China no longer wants German goods in the volumes it once did because it increasingly makes competing products itself, often better and cheaper, subsidized by the state on a scale that no private sector competitor can match.

While partly due to a natural process of Chinese companies climbing the manufacturing value chain, an artificially low yuan (renminbi) is also making Chinese exports cheaper, and imports pricier. The yuan has lost nearly 20% of its value against the euro in nominal terms since mid-2022 and roughly 8% in the past year alone, reducing the impact of EU tariffs and discouraging Chinese investment in Europe. European auto suppliers estimate they face a 35% cost disadvantage against Chinese competitors.

But most importantly, the Chinese Communist Party (CCP) has also been pursuing the biggest, costliest industrial policy in history, built on strategies including the Belt and Road Initiative, Made in China 2025, and Dual Circulation (making others more dependent on China, and China more self-reliant). It’s part of a techno-authoritarian drive to dominate the commanding heights of 21st-century production and geoeconomic power, and to achieve impregnable regime security and national greatness.

Some analysts have seen this coming. When the Party-state unveiled MiC2025 a decade ago, a commentary in Die Zeit dubbed it a declaration of war against Germany, while a detailed study by the Berlin-based Mercator Institute for Chinese Studies (MERICS) characterized it as a forceful challenge to leading economies. In 2019, the Federation of German Industries (BDI) bravely labelled China a “systemic competitor.” A year later a 2020 FDD report, citing original Chinese guidance, laid out the conflict: “Germany wants to maintain its leading position in manufacturing, and China wants to seize this leading position.” But Germany’s government and businesses remained complacent over the ensuing decade.

The Chinese are coming for Germany’s export markets, too. PRC state-subsidized manufacturers of cars, machinery, chemicals, green tech, and more are now competing directly with German firms in Southeast Asia, Latin America, the Middle East, and increasingly in Europe itself. With Trump’s tariff barriers diverting Chinese exports to Europe and other markets, the problem is only worsening.

This is what weaponized interdependence looks like. Germany depends on inputs from China, while China is weaning itself off German imports. German industry relies heavily on China for cobalt, rare earths, graphite, silicon, lithium, and a range of intermediate inputs, such as laptop components, printed circuit boards, and LEDs that it can’t rapidly replace. China controls roughly 80% of rare earth processing capacity globally and over 90% of magnet manufacturing. When the CCP weaponized rare earth and automotive chip exports in spring 2025 in a direct response to European actions it disliked, it wasn’t making an abstract point. It was demonstrating that it holds chokepoints in the supply chains that keep German factories running and German military rearmament on schedule. Berlin was practically mute in response. Pragmatism? More like capitulation.

As Rhodium notes, these problems are now compounded by the trade diversion caused by unusually high American tariffs. Last year China’s exports to the US dropped by nearly a fifth and rose for other markets.

Midnight for the Mittelstand: How bad could it get?

As one industry rep observed, it’s not five minutes to midnight, it’s already midnight. Looking further down the road, the scenarios range from serious to catastrophic. If current trends continue, in the near term Germany faces accelerating deindustrialization in core sectors such as automotive, chemicals and machinery. Expect firms that can no longer compete to close plants, relocate production to China to reduce costs, or simply disappear. Once a factory closes, it doesn’t come back. The institutional knowledge, the skilled workforce and the supplier ecosystem all dissolve.

In the medium term, Germany faces the prospect of being held permanently hostage to CCP political decisions. If Beijing can exert even more influence over the largest economy in Europe, it can further shift the balance of geoeconomic and geopolitical power. This is already happening in miniature. When Berlin in 2019 decided to ban Huawei from its mobile phone networks, Beijing threatened consequences for German automakers, and Germany blinked and then dithered for five years before announcing a phased plan. When Chinese authorities pushed VW on its Urumqi factory, which was operating in the middle of one of the worst human rights situations in the world, the company stayed, and the German government said nothing meaningful. Corporate overexposure has already corrupted German foreign policy. At some threshold of dependency, that capture becomes irreversible.

The worst-case scenario, however, involves Taiwan. Xi Jinping has tasked the People’s Liberation Army to develop the military capability to force unification by 2027. That means war is a scenario for which any serious government and multinational company must plan. Germany shows no sign of having done so. A military conflict in the Taiwan Strait, or even a serious blockade, would trigger Western sanctions against China and potentially cut off German companies’ China assets entirely. The €89 billion in German direct investment in China would be at acute risk. Supply chain disruption across multiple critical industries would follow immediately. Germany’s existing bilateral investment protections would provide no meaningful coverage. A hard decoupling under those conditions would destroy entire German value chains and precipitate a deep recession.

Worst of all, Germans don’t know how exposed they are. Supply chain mapping remains incomplete. Outbound investment screening doesn’t exist. The national economic security strategy promised for 2025 remains unfinished. Germany can’t make good decisions about a vulnerability it hasn’t accurately measured.

The PRC makes no secret of its framework: a Shenzhen news commentator last week observed that “security determines trade, and trade, in turn, influences security.” Xi himself has stated explicitly that China should “increase the dependence of international supply chains on China and establish powerful retaliatory and deterrent capabilities against foreign powers that would try to cut supplies.” That’s China’s geoeconomic strategy. The question is whether Germany and the EU treat it as such, or continue to discover, shock by shock, concession after concession, that they’ve been outplayed by a Leninist Party-state that started thinking about this long before they did.

How Germans built the trap they’re caught in

In a recent essay that’s essential reading, Thorsten Benner pulls no punches:

“Over the past 15 years, Germany has recklessly maneuvered itself into a position of weakness and vulnerability to blackmail vis-à-vis Beijing’s authoritarian state capitalism.”

Germany likes to think of itself as a serious country. It has world-class engineering, a tradition of industrial innovation, and a political culture shaped by hard lessons about the dangers of appeasement. So how did it become the Western democracy most thoroughly enmeshed with—and most paralyzed by—the most systematically coercive authoritarian power of our era?

Here’s how. Successive German governments chose trade over strategy. Under Kohl, Schröder, Merkel, and Scholz, a single organizing principle governed Germany’s approach to China: keep the factories humming. Wandel durch handel (”rapprochement through interweaving”) was a business model pretending to be a foreign policy.

Germany’s China problem is structural. BASF, BMW, Mercedes, Volkswagen, and many of the other DAX-listed companies whose CEOs are joining Merz in China this week account for a disproportionate share of Germany’s export earnings and political weight. As BASF opened a €10 billion facility in China, it simultaneously announced it was “permanently downsizing” in Europe. VW’s former CEO put it bluntly: China probably doesn’t need VW, but VW needs China a lot. The economic consequences are now undeniable.

Unlike Merz’s predecessors, he’s acknowledged the risks from Chinese overcapacities and signalled openness to trade barriers and local content rules. That’s progress, but it’s not policy. In his first months in office, China got lost in the shuffle of Ukraine, transatlantic turbulence, and Germany’s economic stagnation.

There’s a deeper problem lurking beneath the economic one: Germany has never fully developed a strategic culture adequate for dealing with authoritarian powers. This is the country that pressed forward with Nord Stream 2, a gas pipeline from Russia, years after Putin’s 2014 annexation of parts of Ukraine. Until 2022, it was considered an “unpolitical, economic problem,” as if the two could be separated when dealing with Moscow. The same habits of mind still shape how German elites approach China. Strategy is treated as somebody else’s job. The instinct is to outsource serious problems to Brussels. Germany now finds itself at the centre of Europe’s most consequential foreign policy challenge, lacking the intellectual or institutional tools to address it.

CCP plays the corporatist state like an accordion

The German elite built its identity, career success, and understanding of national prosperity on a model that no longer works—but that it’s psychologically averse to abandoning. Through decades of export promotion, investment guarantees, diplomatic cover, and the political normalization of its China exposure, the German state actively built this dependency. It encouraged German firms to invest in China. It made VW’s China revenue politically essential to Germany’s growth statistics. And so, tragically, the liabilities of German business in China have become an intractable problem for the German state, not just for the firms themselves.

Last year German companies invested around €7 billion in China, IW assesses based on Bundesbank data, above the annual average of €6 billion from 2010-2024. The institute says the two main drivers are Chinese industrial policies that induce firms to produce in China for China, and lower costs that enable global competitiveness. Nobody else is doing that right now. That serves the interests of nominally German companies, but not the German people or their country. German firms aren’t the only ones to invest in China of course, but they’re outliers in degree and absolute volume, the concentration of their dependence in systemically important sectors, and their persistent investing despite mounting geopolitical risks and private government entreaties to dial back.

Why hasn’t Berlin stopped this? Because Germany is a liberal corporatist state. German companies lobby the government to make policy that promotes their interests, and in return, they help politicians maximize growth and employment levels, which are the currency of political survival in German electoral politics. It’s the system’s operating logic, in a way that’s different from that of other Western countries. BASF and the big carmakers are considered so systemically important that they receive implicit state guarantees. There’s also the organized lobbying power of the Asia-Pacific Committee of German Business.

By creating the conditions under which German multinationals became dependent on Chinese market access, Beijing acquired leverage not merely over those companies but over the German state itself.

Supply chains for fools

As Germany’s multinationals localized in China, they pulled their entire supplier ecosystems with them. Bosch alone employs 60,000 people in the PRC. The mid-sized companies and suppliers that built their businesses around contracts with VW, BMW, and the rest became structurally dependent on those OEMs’ China revenues. When VW succeeded in China, the orders flowed back through hundreds of Mittelstand suppliers across Germany. When VW started losing in China, those same suppliers felt it, but they also knew that any policy that damages VW risks destroying the orders they depend on even more.

Making China policy a decisive electoral issue would require building a coalition around a diffuse, technical and long-term threat. By contrast, the political costs are up-front. Opposition is starting to cohere, but it’s arrived late, remains fractured, and faces structural obstacles that make effective collective action difficult even when the political will exists.

Even where opposition has organized, it can’t speak with a unified voice. The evidence from the “Made in Europe” debate is instructive. CLEPA, the European auto suppliers’ association, has backed local content requirements and published detailed data showing a 35% cost disadvantage against Chinese competitors. The VDMA, representing German machinery manufacturers, demanded stronger market protection last year, but then this year called local content rules a distraction. More than 1,100 European executives, including Bosch and Continental, signed a public letter supporting “Made in Europe” requirements. But the VDA—which nominally represents the whole automotive industry—has opposed local content rules as bureaucracy, because it speaks first for the OEMs. And even within the multinationals, the coalition has fractured: Volkswagen recently joined a European coalition supporting a “Made in Europe” strategy while BMW actively opposes it.

Industry is split. Companies that manufacture predominantly in Germany want protection. Companies that have invested heavily in China and are pursuing their own “Made in China” strategies see protective measures as obstacles to their outsourcing. Consider that a VDA survey from January 2026 found that 72% of small and medium-sized auto component suppliers plan to cut investments in Germany, and 28% plan to move operations abroad. These are not the multinationals. These are exactly the companies one might expect to lead the opposition. Instead, pulled by industrial gravity, they’re following the multinationals’ relocation logic, embedding themselves deeper into Chinese supply chains because that’s where the production is migrating. The opponent and the protector are, for many of them, the same entity.

Despite Merz’s tougher talk, in January Germany relaunched EV subsidies to the tune of €3 billion without local content requirements, so they include cars made in China, including Chinese brands. Looks worryingly like a signal the Chancellor has quietly picked a side in this debate.

Unionized corporate hostages

In theory, organized labour should be the most powerful vehicle for worker-led opposition. But it has been a systematic obstacle for decades. IG Metall, Germany’s largest and most influential industrial union, spent years actively defending the China status quo because China revenues meant German jobs. The chairman of IG Metall sat on VW’s supervisory board. When VW’s Urumqi plant became a human rights scandal, IG Metall’s response was to ask cautiously what it “means for the company’s reputation”—not to demand withdrawal. The union’s leadership understood that taking an adversarial position on China exposure risked threatening the employment base on which their entire organizational identity was built to protect. I’d call that a corporate hostage situation.

A shift has begun. In July 2025, IG Metall held a closed-door discussion that asked “Is Germany Facing a China Shock?” (spoiler alert: yes) and warned of deindustrialization, but by then the job losses were already mounting. For the crucial period when policy choices still offered real leverage, organized labour worsened the problem. And now that window has closed.

Corporate Germany’s collective action dilemma

Yet another problem is the classic collective action difficulty that political scientists have studied for decades. Large concentrated interests such as VW, BMW and BASF have every incentive to invest heavily in lobbying because the policy decisions in question directly and measurably affect their bottom line. They know what they want, they have the resources to pursue it, and the causal chain between policy change and corporate impact is direct and legible to their leadership.

Small and medium-sized enterprises face the opposite structure. Their individual stake in any given policy decision is real but diffuse. Organizing requires identifying and communicating a shared interest across thousands of firms in different sectors, with different exposure to China, different supplier relationships, and different political connections. The cost of organizing exceeds the expected individual benefit for any single firm, even if the collective benefit would be enormous. This is the textbook free-rider problem, and it systematically advantages the large incumbent players in any lobbying environment.

The economic benefits of the China relationship are increasingly fictitious in their distribution. The profits flow to a handful of large multinationals. The costs—energy bills, tax-funded emergency subsidies, lost industrial competitiveness, and defence spending—are socialized across all German taxpayers and workers. Germany’s corporatist structure means that a small number of firms with concentrated Chinese exposure effectively set the terms of the national debate, while the broader German public pays the price.

There’s a related temporal mismatch. The costs of Chinese competition—lost contracts, eroded margins and slower growth—accumulate gradually and diffusely across many firms. The benefits of accommodation—securing orders, maintaining market access and avoiding retaliation—accrue visibly and immediately to the multinationals and their suppliers. Politicians respond to what’s salient and legible in their constituencies. A VW plant closure is salient. A thousand SMEs each losing 15% of their revenue to Chinese competition over three years is real but electorally invisible until it reaches crisis level.

China and Germany: codependent mercantilists

There’s one final dimension that explains something important about why the framing of this debate has not shifted faster. Like the PRC, Germany has a mercantilist, producer-oriented political economy in which corporations’ interests are systematically privileged over those of consumers. The ‘ordoliberal’ tradition, which shapes German economic governance, is deeply skeptical of protective industrial policy, equating market intervention with distortion. Many of the German actors who are most intellectually opposed to accommodating Beijing are also ideologically uncomfortable with the protective measures that effective pushback would require. The argument for “Made in Europe” requirements or targeted tariffs runs against the instincts of a political establishment that has spent decades preaching free markets.

The CCP, which as an apprentice learned some of its mercantilism from watching Germany, has exploited this contradiction. Now the apprentice has become the master. It presents itself as a champion of free trade and globalization, and Germany’s Pavlovian ordoliberal reflex makes it drool in response to that framing, even as actual PRC behaviour is the opposite. Calling things by their correct names—identifying China’s industrial policy as aggressive mercantilism backed by state power, not market competition—would require a cognitive paradigm shift in how German elites understand their economy and reconcile their own contradictions.

That shift is now underway, driven by the sheer scale of the losses. The CLEPA data, the IG Metall discussions, the Bundesbank president’s call for a more “offensive” response, the BDI’s own critical assessments, all represent a genuine, if belated, mobilization of the interests that should have organized far earlier. What remains to be seen is whether this awakening arrives in time to shape policy before the structural opportunity to do so has passed. Industrial ecosystems, once relocated, do not return. Technological gaps, once opened, widen rather than close. The window for effective counter-organization is narrower today than it was five years ago, and it narrows further with every investment decision made in Zhengzhou rather than Stuttgart.​​​​​​​​​​​​​​​​

The trouble is that like many democratic publics, Germans tend to prioritize short‐term benefits over long‐term ones, and are averse to short-term costs. Merz’s incentive in visiting China is to secure immediate benefits for voters and corporate interests. Changing those incentives would require altering Germany’s institutions and procedures, with things like youth quotas for voting and official representatives of future generations.

How the CCP views Merz and will try to use him

The CCP does not approach a visiting Western leader the way Western leaders approach each other. It does not ask what they want to discuss. It asks what they need, what they fear, what they can deliver domestically, and how pliable they are likely to be under pressure and inducement. By the time Merz landed in China, Beijing would have done extensive homework on all four questions. The answers, from the Party’s perspective, were probably encouraging.

Start with how Xi’s apparatus reads Merz the politician. He’s a conservative CDU chancellor who came to power promising economic renewal after years of stagnation under Olaf Scholz. He talks tougher on China than his predecessors, and his officials have vocally distanced the visit from the “reset” framing of Mark Carney and Keir Starmer, insisting it’s not that kind of trip. Beijing will note all of this, and discount most of it. The CCP has watched a long line of Western politicians arrive with firm rhetoric and leave with softened positions. It has watched Germany specifically for decades, and it understands the structural elements of German politics that we’ve discussed above and that Merz cannot easily escape. The 30 corporate bigwigs with Merz are not a negotiating chip for him, they’re a constraint, and Beijing knows it.

The Party’s assessment of Merz will combine respect for his tougher instincts with a calculated conviction that those instincts can be managed. He is not Merkel, who built an entire governing philosophy around commercial engagement with China and resisted costs to that relationship. But he has also not translated his rhetorical shift into concrete policy. Nine months in office and Germany still lacks outbound investment screening, a completed national economic security strategy, and a comprehensive supply chain dependency map. Beijing reads that gap between tough talk and policy inaction as exploitable space.

What does Beijing want from this visit? Several things, and they operate on different levels simultaneously.

1. Narrative control. The Party’s Propaganda Department has been methodically building a story throughout 2025 and into 2026: a sequence of Western leaders making pilgrimages to Beijing signals the rules-based order’s principal defenders are recalibrating toward accommodation, and that this vindicates China’s long-held position that multipolar pragmatism is replacing American-led alliance solidarity. German officials are acutely aware of this and have explicitly warned against it. One senior German official told Noah Barkin that China’s ultimate objective is “to portray the sequence of recent visits as a rejection of the US and a recognition of China as a guarantor of stability.” That awareness is itself significant. But awareness is not the same as immunity. The choreography provides Beijing with abundant raw material for the narrative it wants to tell, regardless of what is said in the meeting rooms. The photographs will be selected for effect. State media will parse the communiqués for any phrasing that can be amplified as validation.

2. Further fracture European and transatlantic cohesion on China policy. It will do that by demonstrating that Germany, the member state whose position most determines European China strategy, is willing to engage bilaterally on terms that diverge from Brussels. All the EU’s new trade defence tools require German political will to function. If Merz returns from Beijing with a softened posture on issues such as EVs and “Made in Europe” provisions, it will ripple through Brussels. Beijing understands this leverage precisely and has spent years cultivating it.

3. The FTA gambit. In a transparent wedge tactic, China floated the idea of an EU-China free trade agreement ahead of the visit. The pitch is designed to play to Germany’s export-dependent instincts, to create the impression of Chinese generosity and goodwill just as Merz arrives, and to put Berlin in an awkward position relative to Brussels. German officials have already indicated they will decline it, along with MOUs on the revival of the Comprehensive Agreement on Investment (CAI) and the PRC’s Global Governance Initiative. But declining something at the table requires a clearer and more decisive “no” than not being asked at all. Beijing will use the offer as an atmosphere-setter and a test: how does Merz say no, how firmly, and does the rejection come with any conditionality that can be worked with later?

Watching China in Europe

China floats FTA ahead of Merz visit

China is pressing Germany to support the idea of a free trade agreement …

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5 months ago · 27 likes · 5 comments · Noah Barkin

4. Advance China’s position on the export controls standoff. Despite nominal “general licenses,” Chinese exporters are still delivering only 30% of what German companies under license actually need. This is deliberately maintaining pressure and the ability to inflict economic pain on German industry through supply chain chokepoints. The CCP wants Merz to feel this, while offering the prospect of relief if the relationship is managed to China’s satisfaction. Beijing has incorporated Berlin’s relative silence on rare earths last year into its assessment of its leverage and the credibility of German threats of countermeasures.

5. Exploit the timing. Merz arrives in the week before the Party-state’s Lianghui (Two Sessions) during which it will adopt the next Five-Year Plan. That plan will continue the CCP’s industrial policy escalation by doubling down on the subsidized, state-directed production policies that are crushing German industry. By hosting Merz in this window, Beijing creates the impression of cooperative dialogue while simultaneously locking in the next phase of its industrial dominance strategy. The atmospherics of the visit will be used to blunt European criticism of that strategy: how can Brussels object to Chinese overcapacity policy too aggressively when the German chancellor has just finished a cordial bilateral forum with Chinese CEOs?

6. Further co-opt the CEOs. The CCP is extremely skilled at co-opting members of the Davos set of global business and financial elites. Merz is not a Davos Man in the Carney mold, but he is embedded in a political system that’s deeply penetrated by corporate interests with massive China exposure. The 30-company delegation traveling with him represents exactly the constituency through which Beijing has historically shaped German China policy from the inside. Even if Merz himself maintains rhetorical discipline, every CEO in that delegation has interests that point toward accommodation. Beijing will work that room deliberately, offering targeted reassurances, hinting at regulatory relief, quietly signalling the market opportunities that could flow to cooperative firms. The purpose is not to corrupt Merz directly, but rather to multiply the domestic German voices urging him toward moderation when he returns home. The message is warmth gets results, distance is futile.

The deeper strategic logic is consistent with how the CCP approaches all interactions with Western leaders: it wants to condition submission incrementally. It doesn’t need Merz to capitulate visibly. It needs him to return without having imposed new costs on China’s behaviour, without having committed to concrete EU-level de-risking measures, and with his business delegation’s drool reflex for Chinese market access intact and reinforced. If the visit produces that outcome, with a warm photograph, a vague communiqué, and no new policy architecture, the Party-state will notch up a win regardless of what was said in the closed-door meetings.

Merz’s own officials know this. The question is whether their awareness translates into the discipline required to deny Beijing the visit it wants while still conducting the engagement Germany needs. Xi respects toughness and tests for it. How Merz handles the 48 hours of this trip will tell Beijing a great deal about whether the new German government is a constraint it must work around, or European door it can continue to keep open.

Does Merz understand the CCP?

Just before departing Berlin Feb. 24, Merz said he planned to discuss thorny topics including overcapacity, export restrictions, competitive “distortions” and de-risking supply chains, and to warn his hosts that if they don’t take action to curb them, the EU will. The Financial Times also reported he intentionally visited India first before travelling to China to signal intent to reduce dependence. He’s also warned of the risks of investing in China. A longtime free trade advocate, he pivoted to support trade barriers on steel last November.

In a new essay for Foreign Affairs, “How to Avert the Tragedy of Great-Power Politics”, Merz himself writes that China has “been laying the foundations for influence over world affairs for decades. China systematically cultivates dependencies and is reinterpreting the international order.” Speaking of great powers in general, he notes “they exploit the dependencies of others and take advantage of them if necessary. Raw materials, technologies, and supply chains thus become instruments of power” in a “struggle for spheres of influence, dependencies, and allegiances.” There is the music of the Zeitenwende in his words.

Merz writes of “updating” Germany’s relationship with China and managing it “in a more mature fashion,” which I hope is not just a German echo of Starmer’s “more sophisticated relationship” bafflegab. The trouble with such phrasing is that aside from assuring they’ll do a better job than their predecessors, such words can mean anything the speaker later wants. The EU’s economic security strategy employs a “protect, promote, and partner” framework. But while French President Emmanuel Macron has underlined the “protect” part, the Chancellor worryingly still seems keen to promote and partner.

More encouragingly, Merz does pledge to “further de-risk by reducing dependencies,” “work hard to ensure fair competition and level playing fields,” and “shape a more united European approach.” All of that is absolutely necessary. He also shares my preferred framework of “principled realism” for handling relations with Beijing. Sehr gut.

Merz also seems to be aware of the security threat the CCP poses, if not of China’s history. Last week, he told (video in German) a Christian Democratic Union political rally in Trier, “China, in a complete departure from the last 3,000 years of Chinese history, is aggressively expanding its naval bases in the South China Sea, encircling Taiwan and openly declaring that it would be prepared, if necessary, to use military force to bring about the so-called reunification of China.”

Vice Chancellor and Finance Minister Lars Klingbeil‘s November visit to China mainly “resulted in some unenforceable promises on the continued flow of rare-earth mineral exports,” Bloomberg reported, further illustrating Berlin’s lack of leverage, even with the EU behind it. Foreign Minister Johann Wadephul followed with a postponed visit in December. The foreign minister has notably characterized China’s South China Sea behaviour as “increasingly aggressive” and criticized the CCP’s attempts to unilaterally change the status quo in the Taiwan Strait. In Beijing, unlike his British and Canadian counterparts, he seemed uncomfortable with optics that might imply normalization. Instead he accepted friction and rivalry as structural, publicly insisting on reciprocity in the relationship. We might characterize his stance as guarded engagement: keeping channels open as a means of containing fallout, while signalling Germany will continue trying to de-risk. The CCP tried to impose a binary choice on both visiting ministers: cooperation or confrontation, while implying that even the dour Germans had to come and talk with the Chinese.

We can hope Merz understands China’s strategic narrative and will counter with his own.

What the Chancellor should do in China

The key question for Herr Merz is what kind of chancellor he wants to be remembered as: one who finally told Xi Jinping the truth about the unacceptable state of the relationship, or one who flew to China with thirty business executives and came home with a communiqué and a problem he didn’t solve. The stakes are high enough to warrant directness. Germany’s not in a strong position, and PRC negotiation strategy will exploit that. If Merz walks into those rooms as a supplicant focused on getting German companies market access they once took for granted, he’ll leave weaker than he arrived.

Here’s what a serious visit would prioritize:

1. Flat-out reject an FTA. The proposed China-EU free trade agreement is a defensive maneuver. The Party-state wants to lock EU markets open at a moment when Brussels is debating local content rules, cybersecurity restrictions, and other measures that would limit PRC access to critical sectors. An FTA would bypass those defences and indeed bypass the European Commission entirely, which is what Beijing wants. Merz should close the door on this proposal in Beijing, not hedge it. The CCP will read any ambiguity as an opening to press harder.

2. Put the trade imbalance front and centre, with numbers and consequences. If those facts don’t feature prominently in Merz’s closed-door sessions with Xi and Premier Li Qiang, as conditions that China must address concrete remedies or face EU trade barriers, then he might as well have stayed home.

3. Don’t make the business delegation the story. Arriving with 30 bosses sends a message before Merz opens his mouth: Germany needs China. That may be true in the short term, but it’s not the signal a chancellor trying to rebalance a dependent relationship should be leading with. German multinationals want to deepen their dependence on China. But their interests diverge from Germany’s strategic interests, and Merz needs to be explicit about that distinction, both in Beijing and at home. The old model, in which German corporate lobbying effectively set China policy, has to end. Merz should take Carney’s experience as a cautionary tale, maintain guarded distance, and avoid imagery and messaging that imply full normalization.

4. Hold the line on the Party-state’s unacceptable behaviour on Ukraine, Taiwan, and Japan. Xi will raise the issues of Taiwan and Japan’s prime minister (who, in November, said a PRC attack on Taiwan could constitute “a survival-threatening situation” for Tokyo, requiring the use of force, and prompted the CCP to have a raging hissy-fit that continues to this day). Merz should restate the EU position firmly: any change to the status quo must be peaceful and consensual, and the disruption of trade routes through the Taiwan Strait or access to Taiwan’s semiconductor production would be catastrophic for Germany and Europe, and indeed for Japan. That’s just economic reality. Meanwhile, Merz should not soften that line in exchange for promises of rare-earth exports or market access. Such pledges have a spotty track record. The Chancellor should prioritize alliance cohesion and deterrence over economic accommodation.

5. Coordinated EU and likeminded messaging on human rights. Every institutional representative and significant minister visiting Beijing should carry a consistent script covering economic, security, and human rights issues together—not human rights as a diplomatic afterthought raised after the real business is concluded, but integrated throughout. This matters because the Chinese government’s treatment of minorities, dissidents, Hong Kong citizens, and Taiwan is not part of a separate category from its behaviour toward Western democracies and neighbours. It’s an expression of the same underlying pathology. The willingness to use coercion and repression domestically is mirrored in transnational repression and thuggish geopolitical conduct. Consistent collective signalling makes that connection explicit and is harder for Beijing to penalize selectively than isolated statements from individual governments, which it can reward or punish one by one until silence becomes the path of least resistance. The issue is not volume—what critics unfairly stigmatize as “megaphone diplomacy”—but consistency and coordination.

Messaging without consequences is theatre. There must be a legible correlation between what Beijing does and what European governments are willing or unwilling to do in response: if specific coercive measures remain in place, deeper cooperation should not proceed. Those linkages can be conveyed discreetly rather than publicly, but they must be real, and they must be maintained. The most effective approach combines this conditionality with targeted, concrete demands on specific individual cases, for specific policy changes, with measurable outcomes, rather than broad declarations about human rights in the abstract. Targeted demands are harder to deflect with rhetorical counter-narratives and “whataboutism” and their resolution or non-resolution provides an honest test of whether dialogue is actually yielding results.

6. Raise the weaponization of rare earths as a red line. When the Party-state imposed export controls on rare earths and automotive chips last spring, Germany’s faint response was a strategic error. If Merz doesn’t make clear in Beijing that a repeat of that coercion will carry real costs, in the form of coordinated EU countermeasures, accelerated supply chain diversification, and active support for critical minerals projects elsewhere, then he’ll implicitly confirm Germany can be bullied without consequences. More coercion will follow.

7. Don’t return without a commitment to concrete action at home. Germany still has no outbound investment screening mechanism. It hasn’t mapped its supply chain dependencies comprehensively. Its national economic security strategy, promised for 2025, remains unfinished. These aren’t abstract policy concerns; they’re the foundations of strategic autonomy.

The temptation on a trip like this is to perform: to demonstrate statesmanship, signal seriousness, and return with something that can be announced as a success. Party-state officials are masters at presenting that kind of surface without substance. Foreign Minister Wadephul was right when he said that Trump’s tariff offensive changes nothing about Germany’s China problem: “China is still the same country, and the risks to our economy are the same.” That clarity needs to survive contact with Xi Jinping’s hospitality.

Germany has spent thirty years running its China relationship on autopilot. This visit is a chance to seize the controls. Whether Merz uses it that way is the only question that matters.

With assistance from StrategicEffects’ Patricia Xavier, Joseph Widacki and Helen Lee. Andreas Fulda’s book Germany and China was particularly useful for research. Next week, Part 2 looks at how Merz did in China and what Germany and the EU should do next. Thanks for reading. Comments welcome.

Canadian Senator Pamela Wallin recently interviewed me on her No Nonsense video podcast for a deep dive into Canada’s renewed strategic partnership agreement with China. Our discussion explored the true meaning of this shift, including potential costs, distinguishing between the aspects that are necessary and those that are less justifiable. The world is watching how leaders navigate the complexities of diplomacy with both Donald Trump and Xi Jinping, making this a rare moment where what Canada does and says in Beijing can have extensive ripple effects.

For subscribers, here’s a tidied-up transcript of our timely January 16 discussion on the last day of Mark Carney’s first official visit to Beijing.

In it, I argued the liberal rules-based international order has eroded and we are living in a time between orders. Trade and technology are being used for power, leverage, and coercion, meaning dialogue with China cannot be treated as neutral or technocratic. Silence on sensitive issues is often read as acquiescence, and unilateral concessions can be taken as weakness rather than goodwill. The conversation also covered human rights, political prosecutions, Taiwan, electric vehicles, cybersecurity, industrial hollowing out, and the risks of elite capture and strategic dependence. The through-line is that high-level diplomatic dialogue with the PRC is necessary, but substantive cooperation should come with strict conditions, clear red lines, and coordination with allies.

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Q&A

Pamela Wallin: You’ve had a bit of a trip to hell and back with the Chinese. What’s your state of mind today? Have you come to terms with this? Are you at peace? You seem very calm in your comments about China, this deal, and our relationship.

Michael Kovrig: Well, I meditate a lot. I’ve been watching the events unfold with a combination of concern and anxiety about the implications, but also a recognition that some elements are necessary, while others are less necessary. It’s a complicated set of shifts that will have far-reaching implications, not only for Canada but globally. This is a rare case where what Canada did and said will have ripple effects quite widely, because countries across the world are all watching closely how their fellow leaders are dealing with both Donald Trump and with Xi Jinping.

New World Order?

When Mark Carney uses phrases like New World Order in relation to this deal, what do you think he sees?

I don’t know what was going through the man’s mind while doing that, but I think he’s looking to acknowledge that the liberal rules-based international order has significantly eroded and we’re no longer under unipolar U.S. hegemony, which was a relatively short period from the 1990s to the global financial crisis.

We’ve passed into a new phase. I would argue we’re not in a clearly-organized new order. It’s more of a time between orders, increasingly driven by great-power rivalry, particularly between China, the United States, and Russia, that’s much more about power, coercion, leverage, and weaponized interdependence, with states using economic relations for political purposes rather than operating under a World Trade Organization system where trade could largely be based on economic advantage rather than geopolitics.

So we’re in a more geopolitical world, and that’s a more dangerous world for Canada. I don’t think the country is ready for it, and we need to get ready quickly.

Mark Carney sees himself as making some of those necessary changes. The risk is that any change can have unforeseen consequences, and he has to manage a complicated set of issues that touch not only on economics, which is his forté, but also geopolitical challenges, national security issues, and, not least, how to preserve Canadian values, including a belief in human rights, the value of the individual in society, democracy, a free press, and all the other things that make Canada a unique and stable place.

China’s different worldview drives its diplomacy

You write about wolf warrior diplomacy, and that is how China plays the game, and we may have to up ours in order to understand what they’re up to.

Yes, that’s right, absolutely. Chinese diplomacy is very subtle and well-informed, but it also tends to mirror-image and has limits in understanding the rest of the world.

A key thing for Canadians to understand is that the Chinese Communist Party and the government it controls have a fundamentally different worldview than Canadians do. It’s much more realist and power-based, and it’s increasingly using that power to reshape the world. It has a Leninist basis that’s oriented toward struggle and dominance. It cannot trust, so it seeks to control as much as possible. It doesn’t have trusting relationships or true partnerships with other countries, but rather relationships of dominance and subordination, of stronger and weaker parties. Those are the “Law of the Jungle” calculations that its leaders and decision makers are constantly making.

We need to be very clear and careful about what we are dealing with and how to manage the risks. My deepest concern is that whenever you increase engagement, interaction, trade, and investment with China, you also open the door to negative aspects that can put Canadians, national security, and the integrity of our political system at risk.

The CCP’s appalling human rights abuses

This is a country that abuses [human rights]. Some have even used the word genocide to describe how it deals with the Uyghurs and other Muslim populations. You yourself are a direct victim, and there are hundreds of Canadians being held. There is also the flow of illegal drugs into our country and others, including fentanyl precursors. This is a nasty country on many counts.

I would clarify that it’s a nasty regime that uses the people of China. I have a great deal of empathy for the people of China, because this has nothing to do with ethnicity or race. It’s about a political system. If anyone has suffered most at the hands of the Chinese Communist Party and its security organs, it’s the people of China themselves, particularly ethnic minorities, political dissidents, human rights lawyers, and journalists. More than 50 journalists are in prison for doing their jobs and asking questions the Party didn’t want asked. The regime has perpetrated mass human rights violations against over a million Uyghurs. It’s repressed Tibetans for decades. There are thousands of political prisoners in China who are treated worse than I was, and my treatment was not kind.

Democracies must do more to protect themselves

We need to understand that reality. We are not going to change China, at least not anytime soon. Liberal democracies must find ways to protect themselves while still speaking out and coordinating responses to harmful Chinese behaviour. That response can be calculated and strategic, but it cannot be silent, because the Party-state will treat silence as acquiescence and become more aggressive until it meets resistance.

My concern about this visit is that pragmatic steps may have been taken from an economic perspective, but nothing was said publicly about more sensitive issues. Did the Canadian government make clear its red lines? What is Canada not willing to trade away for economic benefit? What signal did that send from a national security perspective? Certain actions should draw consequences from Canada and its allies, because unless that signalling is clear—even if strategically ambiguous on issues like Taiwan—you risk undermining collective deterrence. Middle powers like Canada can deter larger authoritarian states such as China and Russia only through collective deterrence.

Making early concessions on Taiwan shows weakness

On Taiwan, the Prime Minister said Canada’s “one China” policy will remain in place. But he also sent a couple of Liberal MPs home who were on an information-gathering trip to Taiwan and asked them to return ahead of this visit. So it appears the compromises may already have begun.

That’s exactly right. Recalling Canadian MPs from Taipei on the eve of Carney’s Beijing visit looks like a unilateral concession with nothing concrete in return. Why do that? If the idea was goodwill, history should disabuse us. Decades of Western accommodation, from renewed engagement after the [June 4, 1989] Tiananmen Square and related protests and massacres—which were far more widespread than often acknowledged—to WTO accession, enabled China to access vast foreign investment and global markets and rapidly develop its economy. I see no gratitude or moderation in China’s behaviour as a result. The CCP doesn’t reciprocate goodwill. It exploits it.

From the Party’s perspective, that kind of self-censorship—anticipating it will not like something and pulling back Liberal MPs who were already in Taiwan—signals weakness. In the logic of Party cadres, nothing good is given away for free. A leader who restrains himself preemptively is seen as someone who can be pressed harder, whether out of fear, calculation, or personal interest. That’s the challenge.

Is Carney using China to hedge against Trump?

This is the concern many people have about the Canada-U.S. relationship. Some even argue that Prime Minister Carney is deliberately provoking the United States, because that creates space for him to step onto the international stage and pursue new relationships. They suggest the current strain in Canada-U.S. relations presents an opportunity to do things he might not otherwise get away with, especially since Canadians are of mixed mind about the situation.

Everything in Beijing [during Carney’s visit] was carefully watched in Washington: electric vehicle concessions, the energy dialogue, and the language on strategic autonomy that the Chinese side likes to push. It encourages U.S. allies to pursue strategic autonomy because it leads to divide and conquer. Or as Benjamin Franklin said, if we don’t all hang together, we will surely be hanged separately.

All of that intersects with CUSMA (USMCA), Five Eyes intelligence cooperation, NATO, and other long-term accords between the U.S. and Canada that China would like to weaken. It’s almost always the larger party in a negotiation that has the leverage. Even modest moves now carry amplified consequences. The danger is not simply engagement with China, but conditioning. It pairs economic relief with expectations of political restraint later. That is why guardrails are needed, including after the cameras are gone.

When Canada self-censors, it sets an example for others

I can’t really see any particular guardrails that we have put in place in this arrangement, other than we’re going to pay attention and we’re going to be left in the hands of the Prime Minister alone to monitor this, because there’s nothing written, there’s nothing to judge them against, in a concrete way.

A very important part of this meeting and the evolving relationship with China is what happens afterward. People in government have tried to reassure me that even though the Carney government has chosen to be quieter about calling out China’s problematic behavior—his reference to “no more megaphone diplomacy,”—that does not mean the concerns have disappeared.

For Canada, much of that public commentary was often virtue signaling for domestic audiences and had little effect on China, so perhaps some of it was not necessary. But other aspects are important, especially on geopolitical issues, because if Canada is silent, it sets an example for others.

Canada needs to uphold deterrence by signalling that it has an interest in preserving the status quo in the Taiwan Strait and that any attempt by China to change it by force would be unacceptable to Canada and many other Western countries. If enough countries make that clear, you can achieve some deterrence. But if that consensus erodes, there is a high likelihood China will move on Taiwan, with catastrophic consequences for peace and security in the Asia-Pacific region and for the global economy.

China is not the environmental champion it pretends to be

The other thing I found odd is the price, and it’s not the first time, but these repeated references to Canada and China partnering on the move to net zero, that they’re environmental leaders. Nowhere in the world are there more coal mines, dirtier air, and dirtier production. Again, it seems to be a give without a get.

It seems Mark Carney is leaning on aspects of the Chinese system he knows from his previous work in finance and climate policy. The technocrats still working on climate issues are skilled, and China has real capacity and affordable technology to offer Canada. There’s a clear overlap in interests. But we shouldn’t delude ourselves that China is a champion of net-zero emissions. It still produces vast amounts of coal and continues to finance and build coal plants abroad. There’s also a political problem if China floods global markets with subsidized clean technology like solar panels, wind turbines, and electric vehicles. In the short term, cheaper products benefit consumers and may accelerate the green transition. In the long term, they can create strategic dependence on China for supply chains, batteries, and vehicles. China has already shown a willingness to weaponize such dependence for political leverage.

Strong industrial policies and trade barriers are needed to ensure domestic industries in critical sectors can survive. My concern is that China is shaping a world in which it produces nearly half of global manufacturing, while countries like Canada grow food and extract resources but manufacture little, importing advanced technology in return. High-tech is central to power and influence in the 21st century. The question is how to preserve it under those conditions.

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This year began with leaders from Finland, South Korea, Ireland, Canada, and the United Kingdom joining the parade of Western ministers and presidents making official visits to China to defrost, manage and stabilize relations with Beijing in a Trump 2.0 world. Most were seeking three kinds of outcomes: economic relief or advantages, reduced volatility through dialogue mechanisms, and strategic optionality. Most also signalled intent to accommodate increasingly harsh geopolitical realities.

The trend is less about pro-China pivots and more reflective of transactional hedging and temporizing under hegemonic uncertainty. These leaders are rationally betting that a limited effort and some diplomatic smirking can buy them time. Their short-term “wins” have been access to General Secretary Xi Jinping and modest trade and investment goodies, aka “deliverables” in government parlance.

The essence of the trade is “face” for “face-time”. The Chinese Communist Party (CCP) designs these visits to signal its dominant position in the global hierarchy, mute public criticism of its bad behaviour, show that others are accepting normalization on its terms, and use their displays of respect to imply political endorsement of its propaganda narratives.

The problem: Behaviour that’s individually rational for each visiting leader can be collectively and cumulatively harmful. Taken together, such meetings can alter expectations about what degree of accommodation is now the price for access to China’s market and its Politburo Standing Committee members. The cumulative risk for Western governments is the precedent they’re setting, the lessons the CCP will draw from these encounters (pressure works), and whether they do more to legitimize the CCP than they do to bolster others’ security and prosperity.

This creates problems for aligning strategy, whether U.S.-led, EU-centred, or in the style of middle power coalitions that Mark Carney advocated at this year’s World Economic Forum in Davos. What looks like tactical de-escalation in the near term can erode coalition capacity that Washington will likely need and want if it regains leverage over supply-chain chokeholds, rivalry intensifies and its China policy hardens. Expect whiplash in a couple of years.

A new survey by the European Council on Foreign Relations illustrates the dilemma: Donald Trump’s “America First” posture is pushing other countries’ perceptions and policies toward China, even as elites and publics remain wary of Beijing’s use of coercive leverage.

I’ll explore the future implications of these visits in another post. For now let’s talk about the context of the China these leaders are dealing with by synthesizing key points from some of my recent interviews on Canada–China relations, strategic rivalry between China and the West, and international order more broadly.

Below you’ll find links to the resulting coverage, with a signature quote from each, followed by a synthesis of the strategic narrative I tried to convey.

Why Canada Should Have No Illusions About China | TVO Today Live

China’s broader agenda is fundamentally adversarial to Canadian interests and values. Why? Western societies follow the Kantian ideal (at least in principle if surely not always in practice) that we never use humans just as a means to an end. Humans are ends in themselves, and have value in themselves. For the Chinese Communist Party, humans are just means to an end. I’ve heard that personally from Party insiders.

Canada’s spy chief and Michael Kovrig warn China remains major threat to national security | Global News

The purpose of the Chinese Communist Party’s playbook is to advance China’s power and influence around the world. The risk now is that Canadian politicians rush into agreements with China that deliver short-term benefits but have problematic implications for Canadian sovereignty and our freedoms.

Warning against Canada’s ‘strategic partnership’ with China | CTV News

Making China the core of Canada’s diversification strategy is not a good idea, because it is not a geopolitically reliable partner. If you create dependency on China, the CCP will weaponize it for political purposes – and to silence Canada and constrain Canadian foreign policy. What’s needed is a long-term vision of principled realism to protect the country’s interests and values.

How the CCP is trying to undermine the West | National Post

Canada and all open societies need to strengthen their intelligence and security capabilities, not just military, but also the capacity to prevent foreign interference and influence and transnational repression. And we need to double down on alliances with like-minded partners to try to shore up as much of the multilateral liberal order as possible through trade agreements.

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The China we must now face

In all these media interviews, I emphasized a basic reality: today’s China is controlled by a hardline authoritarian regime that increasingly resembles a totalitarian system. It treats other peoples and nations as instruments in service of the Party-state’s overarching ambition to become the world’s leading power, dominate the Indo-Pacific, and reshape global governance in line with its own solipsistic worldview.

The quixotic era of hopeful engagement—the belief that China could be changed by integrating it into the international order and a liberal trading system—is over. Since Xi Jinping took office in 2012, China has moved steadily away from a temporary interlude of softer authoritarianism toward a harsher, more centralized, and more ideologically rigid form of rule. The system today is far more repressive, securitized, and driven by fear than most outsiders appreciate.

My own arbitrary detention was a deeply personal reminder of what that system is capable of. Years of diplomatic work had familiarized me with how the Party-state functions; experiencing it firsthand underscored the urgency of protecting Canada and Canadians and other citizens of free societies from what Beijing is now increasingly prepared to do in the ruthless pursuit of its aims.

China’s mercantilist strategy is de-industrializing the West

Economically, China’s model remains aggressively mercantilist. The Chinese Communist Party seeks to extract commodities and energy from countries like Canada while it moves up the value chain and captures the commanding heights of manufacturing and advanced technology. Economies that rely primarily on commodities often struggle to sustain productivity, mainly because of the institutional, structural, and policy choices that tend to go along with commodity dependence.

Without a robust industrial base, it’s difficult to remain an advanced economy. Meanwhile China’s channeling its growing industrial power into a sweeping civil-military fusion program driving the breathtaking expansion of the People’s Liberation Army.

A liberal international system—in both values and economic structure—is fundamentally incompatible with a one-party hegemon. Whether deliberately or as a byproduct of its geoeconomic strategy, China is dumping surplus industrial production into foreign markets in an effort to sustain domestic growth. That’s hollowing out competitors’ manufacturing bases and locking in asymmetric dependence. In this context, tariffs on Chinese overcapacity, especially in strategic sectors such as electric vehicles, are not reckless acts of protectionism. Instead, they are prudent policies and necessary defensive measures. Can minimum prices and quotas accomplish the same task? We’re about to find out.

High-tech cooperation with China has likewise become increasingly impossible. For decades, Beijing has required foreign firms to transfer technology as the price of market access and has repeatedly siphoned off innovations for military or strategic use. Genuine reciprocity in sensitive sectors is obviously no longer viable, if indeed it ever was. Canada must protect its strategic industries and emerging technologies accordingly.

Dialogue despite divergence

Canada cannot assess China in isolation. We are operating in a turbulent geopolitical environment shaped by shifts in the U.S.-Canada relationship, rising great-power rivalry, and the increasingly assertive agenda of authoritarian states. China is reshaping the world as profoundly as climate change: faster than our political systems can adapt, yet slowly enough that the full scale of the transformation is often hard to register in the daily news cycle.

At its root, the Canada-China relationship is defined by a clash of interests and agendas. Beijing seeks a world more amenable to one-party rule and to its own dominance. Canada seeks to protect its sovereignty, its security, and the prosperity of a modern, advanced industrial economy, as well as what remains of an international order based on rules with embedded liberal values. Dialogue cannot erase this structural divergence, but it can help to manage it.

Diplomacy without delusion

Dealing with China is unavoidable. The country is too large and too systemically important to ignore. But all interactions must be careful and conducted from a position of strategic forethought rather than improvisational naïveté or hasty transactional “pragmatism". The West’s policy of containment of the Soviet Union during the Cold War is not an exact model for how to do that, but it’s a useful benchmark for the level of caution and vigilance required. Given how enmeshed China has become in global networks, and its greater scale and power relative to the USSR, constrainment is a more realistic strategic framework.

High-level diplomacy with Xi Jinping matters precisely because decision-making in the PRC system has become so centralized. But Canadians must not accept the CCP’s demands to adopt a “correct perception” of China—which is basically shorthand for silencing criticism in exchange for access. That’s not realism; it’s conditionality dressed up as diplomacy.

Diversify or be dependent

For the Canadian government and the Canadian public alike, my advice is simple: keep calm and diversify. When relations with the United States become difficult, we mustn’t panic or rush into deeper economic dependence on an authoritarian state that may offer short-term opportunity at the cost of long-term vulnerability.

Democracies should strengthen trade, investment, and security ties with other democracies and likeminded states that share interests and are at least not strategic threats—across Europe, Latin America, Africa, and especially the dynamic Indo-Pacific including ASEAN, Japan, South Korea, India, Indonesia, and other CPTPP partners. From such a sturdy foundation, Canada can deal with China with a stronger hand.

As in any relationship, trying too hard to please or appearing desperate rarely produces good outcomes. Confidence, clarity, and firm boundaries matter.

A definite need for deterrence

China is also materially supporting Russia’s war effort through energy purchases, machine-tool supply, and financial assistance in circumvention of sanctions. At the same time, it is intensifying pressure in the South China Sea and around Taiwan. If Beijing concludes that deterrence in the Western Pacific is weakening, the risks of conflict rise.

Modern conflict is now an industrial and technological competition. Think drones, AI, advanced manufacturing, and resilient supply chains. Canada and its allies must rebuild industrial capacity, strengthen shared technological ecosystems, and improve defence procurement to restore credible deterrence and reduce the likelihood of war.

The weaponization threshold test

Every interaction with China, whether commercial, technological, political, or diplomatic, should be evaluated through a simple test: Will this create leverage that could later be weaponized against us? If the answer is yes, stop, or at least proceed with extreme caution.

Limited, bounded trade is possible when benefits are clear and strategic risks are low. Dependency in leverage-sensitive sectors is simply untenable. Yes, there is no single substitute for China. But the vulnerabilities aren’t aggregate, they’re specific and sectoral. Fix the over-dependence where it really matters.

The challenge before us now

In a world where authoritarian powers are increasingly assertive, the task is not retreat, but the disciplined securing of Canada’s future. That means a principled defence of our democracy, our economy, our security, and our values.

It also requires resilience at home and stronger partnerships abroad, grounded in a sober understanding of the authoritarian ambition we now face. Canada must communicate a coherent and confident narrative to the world—not rhetorical, but rooted in the reality of the country’s tangible advantages. Our actions must demonstrate, consistently and credibly, why long-term partnership with Canada is the more reliable choice.

A disordered world also demands a rapid improvement in China competence: a better-informed public, a more realistic media conversation, and policymakers equipped to navigate systemic rivalry. The illusions of the past no longer serve us. What is required now is clarity of purpose, confidence of posture, and coherence of strategy.

What happens next will not be decided by slogans or sentiment, but by choices that are deliberate and sometimes uncomfortable, made by governments, businesses, and citizens alike. China policy is no longer a niche foreign-policy file. It is now central to Canada’s economic future, national security, and democratic resilience. That demands sustained public attention, institutional memory, and political courage. Drift is no longer a viable strategy.

In trade, in technology, in diplomacy, and in defence, Canada must move beyond reactive swings and anchor its China policy in long-term strategic planning that survives election cycles and media shocks. The most dangerous policy would be neither confrontation nor engagement, but complacent improvisation.

For Canadians, the central responsibility is to stay informed, resist comforting illusions, and demand principled seriousness from those who govern. This is not some distant geopolitical drama. The decisions made now will shape our security, our economy, and our freedom for decades.

StrategicEffects consultants Jonathan Landreth, Patricia Xavier and Joe Widacki contributed research for this post.

As Sir Keir Starmer travels to China this week, the British government’s agenda is ambitious: resetting bilateral relations, boosting trade and investment, and securing practical agreements on matters including visas and embassy reciprocity, all while eking out economic opportunities without sacrificing national security. Not easy. To avoid pitfalls that have hindered his predecessors and other Western leaders, the prime minister should keep the political optics and leader-level agenda tightly focused on measurable deliverables that advance a long-term strategic transformation in the United Kingdom’s policy toward China.

As an analyst and diplomat who served in Beijing and Hong Kong—and spent nearly three years as a hostage within China’s Orwellian political-legal-security apparatus, conversing with its insiders and inmates—let me offer a few insights into the worldview and agenda of the Chinese Communist Party (CCP). Based on my team’s research on previous visits by British prime ministers and recent trips by leaders from Spain, Australia, France, Ireland, Finland, and Canada, we can also draw lessons on how Chinese officials assess and manipulate their guests, and identify a narrow path for success.

China is the UK’s #3 trading partner and #5 export market

London is the top offshore RMB trading hub

The UK is the top study destination for Chinese students1

China’s enormous scale and exceptional capacity to marshal massive means to achieve strategic ends already make it a unique challenge. The additional complication is that China’s autocratic leader, Xi Jinping, and his authoritarian one-party state are fundamentally different beasts from their Western counterparts. The Party-state may speak of building trust, but what it really seeks is control. Its hostile behaviour stems from a legitimating ideology currently personalized as Xi Jinping Thought, Leninist organizational behaviour, solipsistic Han Chinese ethno-nationalism, and a political culture of perpetual struggle, cyclically rotted by endemic corruption and cauterized by relentless purges, most recently roiling the People’s Liberation Army. Through an increasingly aggressive foreign policy, this vast and secretive organization aims to shatter the West into fragments it can remold within a new, more Sinocentric world order.

Fools’ gold and false premises

That’s the toxic atmosphere Sir Keir will inhale as the first British prime minister to enter Beijing’s Great Hall of the People since Theresa May in 2018. Like David Cameron, May spoke of a “golden era” in relations. But as Martin Thorley illuminates in his book All That Glistens, intractable frictions removed the golden shine together with delusions the CCP would prioritize Western legitimation and market access over geopolitical rivalry, that interdependence would constrain confrontation, and that London could arbitrage between Washington and Beijing. And yet the “golden” fantasy now risks an unwise comeback.

Times have hardened, as has the CCP. Starmer is travelling in the wake of Beijing’s abrogation of the Sino-British Joint Declaration, torture of a former British consulate employee, persecution of other citizens, spy scandals, thuggery, and myriad other moves against the UK and its allies.

It should be obvious now: a China policy fails if it overlooks the Party’s adversarial nature and intentions. All governments are one political hostage, trade dispute or frank statement away from a China crisis.

​​Internally divided and desperate to balance budgets without cutting entitlements, British and other Western elites have nonetheless accommodated Xi’s agenda in the vain hope of economic lifelines and competitive coexistence. But the Party treats stability as tactical and constantly seeks to improve its position in a zero-sum pursuit of security through centrality. The Labour government must internalize that cohabitation is possible only as the consequence of a favourable balance of power restored through economic resilience, military rearmament, industrial and technological renewal, allied and likeminded coordination, deterrence by denial, and constant constraints on the Party-state.

Focus on what’s possible and don’t let Beijing shape the narrative

The CCP’s propaganda portrays an economically strained, strategically stressed London, pragmatically seeking investment while balancing between Washington and Beijing. It will use the visit to ratify a narrative that Britain can normalize and stabilize relations through trade and investment, “strategic autonomy” and a “correct” perception of China. The PM must counter with his own strategic narrative that he is there to take China’s measure, defend British and Western interests, lock in a few narrow economic opportunities, and deploy leverage to shape incentives and deter bad behaviour. He should smile less than the Chinese do, favour a determined, statesmanlike demeanour, stick to undramatic language with clear conditionality, and reinforce it in any communiqués and memoranda. And please, no talk of “strategic partnership for the new world order.”

The price of the PM’s entry ticket to the Middle Kingdom was the approval of a new mega-embassy in London and revival of a business dialogue. Accepting access as a prize already puts Starmer at a disadvantage—the Party will treat it as a sunk cost. So, any further concessions must be balanced with fair sequencing of reciprocal ones. That requires defining a few deliverables with follow-up processes and timelines, measurable benchmarks, off-ramps to reverse course, and consequences for non-fulfillment.

Similarly to Canadian Prime Minister Mark Carney’s recent visit, three areas where Starmer’s delegation can make material progress are targeted, verifiable commercial and regulatory agreements that advantage and protect British businesses; re-opening and stabilizing diplomatic dialogue and negotiation mechanisms and giving them leader-level direction to resolve problems; and incremental progress on mobility and people-to-people issues such as visa processing and educational and cultural exchanges.

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Firmly and diplomatically convey red lines, costs and consequences

He should resist downplaying discussion of security issues. Silence abets China’s manipulation of British public perceptions. Clarify red lines, particularly with Xi, and press for measurable geopolitical outcomes. The General Secretary is unlikely to concede anything on points of contention such as China’s strategic technology policy, overproduction and aggressive mercantilism, espionage and interference, mass human rights violations and transnational repression, decisive enabling of Putin’s war on Ukraine, or coercion of Asian neighbours and UK allies. But by resolutely raising them, Starmer—and leaders who follow him this year, including Germany’s Friedrich Merz in February and Donald Trump in April—can at least signal costs and consequences in the form of growing opposition to China’s aims and damage to its reputation.

Reconciling economic benefits with national security costs without compromising core democratic values requires commensurately strengthening the government’s defence and offence. That includes human rights advocacy with specific, measurable objectives. The CCP’s jailing and persecution of British citizen and free speech champion Jimmy Lai in Hong Kong presents a test of whether leader-level engagement dilutes or reinforces values. Ministers should press relentlessly for consular access, humane conditions, and humanitarian release.

Toward a UK strategy for China and the new world disorder

Geopolitical winter is coming because authoritarian powers treat rules as tools and coercion as normal. Britain’s response must be whole-of-society: rebuild industrial capacity, invest in defence and resilience, educate the public about the challenge, protect democratic institutions, and demand competence and honesty from leaders.

First, Whitehall must build security guardrails that are stronger than Beijing’s economic incentives. If market access can be exchanged for political restraint, the Party will keep offering “relief” that conditions British behaviour.

Second, the relevant ministries must incentivize companies to diversify trade, or be coerced by China. This isn’t abstract, it’s arithmetic. Set a national exposure standard: no critical export sector should rely on China for a dominant share of sales without a funded diversification plan.

Third, the government must lead a re-industrialization so Britain is not trapped between two powers with leverage over it. The Second China Shock is not just coming, for many sectors it is here, in the form of subsidized overproduction, below-cost exports, and industrial dominance in batteries, electric vehicle supply chains, and clean tech. Britain must rebuild advanced manufacturing in sectors where it matters, protect strategic industries, and invest in productivity, not resign itself to being a services annex. Workers will thank the Labour Party for doing what it says on the tin.

In foreign policy, Mark Carney’s recent rousing speech in Davos offers a way forward—but only if it is backed by consistent, unified action from other Western countries and middle powers. So far, most have failed to implement a coherent China policy of their own, let alone a common approach across liberal democracies and like-minded partners. The United Kingdom is uniquely positioned to play a crucial role in changing that, and in forging networks and coalitions with a common approach that constrains the CCP’s worst impulses while preserving some limited gains from engaging with Chinese businesses and people.

Starmer should treat 2026 as a year to stabilize diplomatic channels, harden defences and ensure any new points of connection don’t create strategic vulnerabilities. He should be careful not to overestimate economic opportunities or underestimate Xi’s tolerance for disagreement—the General Secretary respects toughness.

A successful official visit to China is about achieving substantive outcomes, avoiding concessions, and controlling the narrative. By reinforcing what their predecessors did well and avoiding their errors, Sir Keir and likeminded leaders can mark a different kind of turning point in relations: one that starts to constrain the CCP and reverse its efforts to hasten the West’s slide toward civilizational assisted suicide.

The Labour government must internalize that cohabitation is possible only as the consequence of a favourable balance of power restored through economic resilience, military rearmament, industrial and technological renewal, allied and likeminded coordination, deterrence by denial, and constant constraints on the CCP.

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StrategicEffects consultants Jonathan Landreth, Patricia Xavier and Joe Widacki contributed research for this post.

Canadian Prime Minister Mark Carney’s first official visit to China from January 14-17 marked a significant return to normalized diplomatic relations after an eight-year freeze.

I’ll have more to say about it in due course (check my Substack posts for hot takes), but first let’s turn to Vina Nadjibulla, Vice-President of Research & Strategy at the Asia-Pacific Foundation of Canada, for her sharp assessment of the key outcomes in an article originally published in Policy Magazine on January 18, 2026. More to come from me on this topic. In the meantime, read her essay!
—Michael

Prime Minister Mark Carney’s visit to China will stand as one of the most consequential moments in Canada’s foreign policy. It not only reframed Canada’s relationship with China but also signalled a fundamentally new approach to how Ottawa intends to navigate a more fragmented, contested and uncertain world.

On the bilateral front, the trip produced three tangible outcomes: a new strategic partnership framework, a roadmap for economic and trade cooperation, and provisional progress on two of the most politically sensitive trade files in the relationship—electric vehicles and canola.

Taken on their own, these outcomes would already make the trip significant. But to understand what Mr. Carney was trying to achieve in Beijing—and why the outcomes and symbolism of the visit matter so much—we need to situate it within his broader effort to fundamentally rewire Canadian foreign policy and Canada’s place in the world.

This was not simply about stabilizing relations with China. It was about signalling, and beginning to implement, a more independent Canadian foreign policy in response to fundamental shifts in the global economic and security order—and a growing recognition that Canada can no longer rely on old assumptions about alliances, global rules, predictability, or insulation from geopolitical shock, including in its relationship with the United States.

A world that has ‘ruptured’

In his press briefing in Beijing, Carney emphasized that Canada must “see the world as it is, not as we wish it to be.” He reiterated the observation made in his speech to the Council on Foreign Relations last September that the world is undergoing a rupture rather than a gradual transition, which is true in terms of the stunning geopolitical impact of Trump’s second term, but also belies a systemic evolution that has unfolded over the past two decades. Multilateral institutions are now weaker, technological and energy transformations are accelerating, and economic relations are increasingly shaped by power rather than rules.

This framing matters. Carney was not merely defending engagement with China; he was articulating the intellectual foundation for a broader rewiring of Canadian foreign policy. The implication is that Canada can no longer rely on inherited assumptions about its benign interdependence with the United States. Instead, Canada must re-tool its economic posture for a world in which “friend-shoring” is partial, supply chains are weaponized, and economic coercion is increasingly normalized. In such a world, market access is no longer a passive benefit of globalization, but a strategic instrument that must be diversified, protected, and actively managed.

For a country as trade-dependent as Canada, this shift is consequential. The United States remains Canada’s most important relationship, but it has become more transactional, more unreliable, and more willing to weaponize market access—even toward allies. China, meanwhile, has a clear track record of deploying economic coercion against Canada and others, using trade dependence to extract political compliance. Carney’s China trip is best understood as part of a broader effort to adapt Canada’s economic and foreign-policy posture to these realities, rather than continue operating as if the old order still applies.

The strategic partnership—and its limits

The most striking outcome of the visit was the announcement of a new strategic partnership between Canada and China. The term is politically charged and carries significant historical baggage. Canada last designated its relationship with China a strategic partnership in 2005, under very different global, economic, and political conditions. It is therefore unsurprising that the announcement has generated confusion—some interpreting it as a return to the pre-2018 model of engagement centred on expanding economic ties, others questioning how China could move, in a matter of months, from being described by the prime minister as a major security challenge to being labelled a strategic partner.

This new strategic partnership is best understood as Prime Minister Carney’s concept of “variable geometry” of engagement. Under this logic, strategic partnerships in the current era do not necessarily signal alignment, shared values, or comprehensive cooperation. Instead, they can function as pragmatic, interest-based frameworks for selective engagement—defined by clear limits and guardrails. They reflect a world in which countries engage differently with different partners, across different sectors, with clear limits—and where cooperation in one domain does not imply trust, convergence, or alignment in others.

Seen through this lens, the partnership with China is not a return to the expansive engagement of the early 2000s. It is an attempt to define a structured framework for cooperation in clearly identified areas, while maintaining distance elsewhere. Carney framed the partnership explicitly around working together “where we are aligned,” namely five pillars: clean energy and climate competitiveness; expanded trade, particularly in agriculture and energy; multilateral cooperation; public safety and security; and people-to-people ties. These pillars are revealing precisely because of what they include—and what they exclude. There is no reference to sensitive sectors such as artificial intelligence, advanced technologies, defence, or intelligence cooperation.

Equally important, the visit revived long-dormant mechanisms of engagement—ministerial dialogues, working groups, and sectoral cooperation—designed to manage interaction and reduce friction, not to signal trust or strategic convergence. From Ottawa’s perspective, this is about rebuilding channels to cooperate where mutually beneficial, and to contain disputes—not about redefining China as a trusted partner.

The risks: dependence and misinterpretation

This approach, however, only works if there is sustained strategic clarity—at home and with Beijing. Canada has historically used the language of strategic partnership sparingly, and typically with countries with which it shares values and broad alignment. Applying it to China therefore represents a significant departure from past practice and will require disciplined, consistent communication.

One central risk is misinterpretation: that pragmatic, interest-based engagement is mistaken for a broader re-engagement with China, or for a softening of Canada’s assessment of the national and economic security challenges China poses. At the same time, there is a real risk that Beijing does not share Ottawa’s understanding of the partnership’s limits. If Canada views the framework as clearly defined around specific pillars while China interprets it as a pathway toward deeper economic integration or political accommodation, frictions will re-emerge quickly.

Strategic dependence remains a particular vulnerability. Canola is the clearest example. While restoring market access offers short-term relief, expanding reliance on the Chinese market without a serious diversification strategy would increase long-term risk. Reducing exposure will require both market diversification and movement up the value chain, rather than deeper dependence on the Chinese market.

Domestic politics further constrain Ottawa’s room to manoeuvre. Engagement without visible guardrails—on investment in sensitive sectors, cooperation in dual-use technologies, and protection against foreign interference, transnational repression and cyberthreats—will erode public trust. Trade-offs between sectors and regions, particularly between EV manufacturing and agriculture, will sharpen political resistance if Canadians are not persuaded that the benefits of engagement with China are real and clearly outweigh the risks.

Washington and the end of waiting

It is increasingly clear that the Canada–U.S. relationship will not revert to what it once was—defined by shared values, predictability, and broad alignment of interests. Canada can no longer afford to wait for clarity or reassurance (including on the future of CUSMA) that may never come. The choice Carney appears to be making is to prioritize Canadian interests and long-term resilience in the evolving world order, even if doing so introduces more friction or risks retaliation from President Trump.

Carney’s visit to China did not resolve the structural challenges Canada faces. But it did signal a willingness to confront them directly—and to begin rewiring Canada’s foreign policy for a world defined less an alliance with the US and more by power, leverage, and choice.

In doing so, Carney has positioned Canada among the first of Washington’s closest allies to move openly in this direction. While others continue to delay or hope for a return to a more familiar order, Canada is testing whether a pragmatic, interest-driven approach can provide a workable foundation for an independent Canadian foreign policy.

Speaking this week at the World Economic Forum in Davos, Carney further reinforced his message that this is a calibrated partnership rather than a return to pre-2018 engagement agenda. The challenge will be in implementation. Many risks lie ahead.

Read the essay at Policy Magazine

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Human Rights Watch says Canada’s Prime Minister Mark Carney should make human rights a key focus of his Jan 14-17 visit to China. Since the last trip by a Canadian leader nearly a decade ago, the CCP has significantly increased its authoritarian repression both at home and abroad, the organization accurately warns. The United Nations, HRW, and other organizations have for several years reported on crimes against humanity by Chinese authorities, Wang notes. Repression is getting worse. Last week, for example, police detained Christian church members.

That dire trend “threatens not just the rights of people in China but, increasingly, Canada’s core interests and values,” says the NGO’s China expert Maya Wang in a January 9 press release. “Carney should ensure that engagements with the Chinese government on trade and security are consistent with Canada’s values, which includes the promotion of human rights.”

“Key issues Carney should raise include links between the Chinese government’s forced labour and imports to Canada; the persecution and imprisonment of human rights defenders; and China’s targeting of critics abroad, including in Canada,” Human Rights Watch says. “Carney should also raise concerns about drones produced by China-based companies being sold to Russia and then used to attack civilians in Ukraine.”

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Carney has a particularly timely opportunity to advocate for humanitarian release for Apple Daily publisher Jimmy Lai, a champion of freedom convicted of conspiracy last year in a political show trial. The 78-year-old faces a prison term ranging from 10 years to life, and mitigation hearings to debate the severity of his sentence run Jan. 12–15, coinciding with the PM’s visit.

Canada’s PM and Foreign Minister Anita Anand should also raise other concerns and cases. Calling for changes in the Party-state’s treatment of ethnic minorities such as Uyghurs and Tibetans, dissidents like Wang Bingzhang, lawyers such as Xu Zhiyong and Ding Jiaxi, and journalists including Dong Yuyu and apparently the South China Morning Post’s Minnie Chan, is not only about defending universal human values, it’s also a matter of national security and sovereignty. Several are foreign citizens or residents with close family ties in Canada or elsewhere.

In addition, the PRC has also egregiously sanctioned reputable Canadian civil society organizations and moderate advocates including Sherap Therchin and Margaret McCuaig-Johnston. A few months before Carney took office last year it executed four Canadian citizens.

As those and far too many other examples illustrate, how the CCP behaves toward people it governs, detains, or dislikes is a flashing warning light about how it’s likely to deal with other citizens and countries it acquires power over. The Party-state system interprets silence about violations of international laws, norms, and human rights treaties as acquiescence that emboldens it to grind further into aggression, totalitarianism and weaponizing its political-legal system.

Human rights aren’t a separate issue that can be tidily compartmentalized into perfunctory dialogues. From detaining individuals to oppressing groups to coercing countries, PRC violations are an inextricable part of a continuum of geopolitical, geoeconomic, and global security challenges its one-party state increasingly poses. That’s why the necessary whole-of-government-and-society responses must be holistic, strategic, and grounded in principled realism and a long-term vision of statecraft rather than short-term, transactional, issue-by-issue dealmaking.

I encourage you to read the full press release and HRW’s annual China report, and to add your own voice. Silence is deadly.

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Canada in 2024 imposed hefty import duties on Chinese electric vehicles, steel and aluminum to counteract the massive subsidies and other economic distortions that are driving the domestic overproduction, price wars and a tidal wave of exports that are part of China Shock 2.0. The Trudeau government’s main purposes were protecting Canadian industry and aligning with similar American policies. They weren’t WTO-compliant, but doing nothing would likely have let in even more cut-price imports as trade diverted from the closed US market.

In spring 2025, Beijing slapped high tariffs on Canadian canola, seafood, and other vulnerable agri-food sectors, and said it would lift them if Ottawa dropped its own duties. The retaliation is not only unjustified—the Canadian exports are not unusually subsidized—but also asymmetric. Canada mainly denied potential sales of future exports; China inflicted an immediate halt on current exports.

Now the two governments are negotiating. This week in a Q&A with , editor of Canadian magazine , I unpack the PRC’s tactics and strategic ambitions. The key takeaway is that this is not just a short-term economic disagreement—it’s the latest battle in a long, geopolitical struggle over the power hierarchy that determines world order for the rest of the 21st century. Canadians need to understand the game they’re now playing and the new rules the Chinese Communist Party (CCP) is trying to impose.

Questions we discussed

• Did Canada misread China’s willingness to retaliate?

• Is this the start of a more dangerous rupture between Ottawa and Beijing?

• How should we understand the logic behind China’s actions?

• What’s the strategy? What exactly does China want from Canada?

• Why is it that every Canadian government vows to diversify away from China, only to end up dragged back into its orbit?

• Is fear an important factor?

• Does Ottawa have real leverage against China?

• Are there alternative tools Canada can use instead of tit‑for‑tat trade measures?

• How do we counter threats directly?

• Say you have Canadian prime minister Mark Carney’s ear. What’s your advice?

• If Canadian negotiators took away just one working rule, what should it be?

Answers to these questions and more in the Q&A.

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What can Canada and others do in these types of disputes with China?

I offer some answers in the Walrus. Here are some further thoughts:

Experience shows that if the targeted country holds to a clear, consistent policy line, diversifies economically and hardens politically against foreign interference, Beijing tends to quietly de-escalate and roll back once its officials internalize that the punishment is not only failing to change policies but also making them look bad. That’s more likely to happen if Party-state officials have an offramp and a face-saving narrative in which they can say the other guys “corrected their mistakes”.

To defend against Chinese companies dumping their subsidized overproduction, Canada can impose regulatory friction through measures like technical delays that are more politically neutral and procedurally justifiable than tariffs. Import quotas may become an effective alternative in some sectors. Compliance with cybersecurity regulations and Canadian weather conditions could be another non-tariff barrier. Those can buy time for North American manufacturers to adjust and infant industries to grow.

For victimized sectors like agriculture and provinces like the prairies, federal and provincial governments can use credit guarantees, insurance and temporary purchasing programs to alleviate economic losses so they have less incentive to lobby on Beijing’s behalf. Diffuse the pain across the whole economy.

Then, focus on resilience and preventing the next crisis by addressing a geopolitical market failure in which companies aren’t accurately pricing China risk. The goal should be ensuring that no single buyer can weaponize market access to demand political compliance.

The Prime Minister could lead a whole-of-government diversification strategy that reduces not only exposure to the US but also to China. It would probably require creating inter-departmental coordination mechanisms and structural hedges against coercion, with federal measures complemented by bottom-up sectoral diversification strategies. Work with think tanks and industry groups like the Canadian Chamber of Commerce and the Business Council of Canada to foster more strategic planning and national security expertise in the private sector.

Prioritize more extensive marketing to a wider range of buyers, negotiating better terms of access to those markets, and for farmers, growing crops that depend less on Chinese buyers. Focus on markets with rising demand that are already within trade frameworks such as CPTPP. The new Indo-Pacific Agriculture and Agri-Food Office in Manila is an example of efforts to link Canadian producers and Asian buyers.

Respond to pressure asymmetrically and through small, incremental adjustments, institutions and mechanisms that are hard to retaliate against. You give me a one-time shock, I build a long term capability to shrug it off. What about incentivizing investment into Canadian sectors where China has vulnerabilities and depends on foreign imports, and building leverage as a critical supplier?

In general, domestic economic and industrial policies applied with a security lens could also increase leverage by strengthening the overall economy and reducing its dependence on politically-vulnerable exports. Continue building state capacity to protect economic security.

The updated Investment Canada Act allows for expanding national security reviews and scrutiny of Chinese acquisitions in sectors such as mining and advanced technology, particularly from state-owned or affiliated companies. Outbound investment restrictions can be tightened to restrict Chinese access to Canadian financing and technology.

The government can also tighten supply-chain transparency and due diligence requirements, particularly in sectors such as textiles, where some Chinese firms have a deplorable track record of using forced labour. Investing in further multilateral diplomacy to strengthen mechanisms that protect human rights norms would also enhance their effectiveness as means of leverage in negotiations. Support campaigns that call on China and others to ratify the International Covenant on Civil and Political Rights, for example. That’s a pain point for the Party.

Canada can also do more to push back against CCP propaganda narratives, expose influence operations and cyberespionage, and other nefarious activities. A robust foreign agent registry and related monitoring would close off channels of influence. The threat of exposing shameful behaviour can be a source of leverage. Fund civil society efforts to promote transparency and independent reporting on China.

Every time China applies a punitive measure on Canada, take material steps to enhance ties with Taiwan and other Indo-Pacific powers. Or take measures that complicate PRC access to the Arctic, where it’s trying to expand its presence and influence. Incentivize pension funds to reduce their exposure to China.

Measures like those are most effective when applied by multiple countries in coordination. Forming and hardening coalitions with other exporting countries and targets of CCP coercion would help curtail backfilling in cases where China targets one country and then buys more from others like Australia or Brazil. Beijing uses bilateral leverage to achieve submission. Multilateral responses can thwart its behavioural conditioning attempts.

What about working with the European Union’s anti-coercion instrument like a kind of nuclear umbrella? Or implementing the G7 Coordination Platform on Economic Coercion? What if Canada and other like-minded countries signed accords to all trigger similar responses if coercion was used against any one of them?

Bottom line: Canada must prioritize strategic resilience, or remain trapped in reactive dependency. Make coercion self-defeating by responding with principled realism. Categorically refuse to accept political deference as a precondition for economic cooperation, document and attribute bad behaviour, respond to it by imposing real costs and taking impactful measures, and frame Canadian resilience as a model for others.

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Dive deeper on the Second China Shock and China-Canada relations in these posts:

The human reality: Jimmy is 78, has diabetes, and has already spent ~5 years in custody—much of it in solitary confinement, which I can attest is a form of slow torture. He’s already suffered severe punishment, and now faces a minimum jail sentence of 10 years and up to life imprisonment.

CCP/HK Government narrative: Lai is a “traitor” who masterminded the protests and did the evil bidding of hostile foreign forces. He harboured “resentment and hatred of the PRC,” said Judge Esther Toh, and his intent “was to see the downfall of the CCP.” He “was obsessed with changing the [Communist Party’s] culture and values to one of Western values” and wanted to turn “China into a lackey of the West,” the judges said. The verdict supports a broader CCP narrative that the Hong Kong protests were part of an attempted colour revolution.

Truthful counter-narrative: Jimmy is a passionate and defiant voice for democracy and freedom for Hong Kong people, and for press freedom more broadly. He wasn’t a separatist or revolutionary. His protests were peaceful and his meetings with diplomats and foreign officials were normal advocacy and legitimate activism for China to respect the terms of the original handover agreement and allow the people of Hong Kong a say in how they’re governed.

A truly legitimate and confident government doesn’t fear peaceful protest and doesn’t need to weaponize the law to silence its critics. The smart play for Hong Kong’s government would be a commuted sentence of deportation or the more humane conditions of house arrest.

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Why it matters: A British citizen faces life in prison for journalism and peaceful calls for democracy. Lai chose to stay in HK rather than flee, writing: “I must face the consequences of my actions, just or unjust.” His case is a bellwether for Hong Kong’s rule of law and press freedom globally. In violation of commitments under the Sino-British Joint Declaration and international human rights covenants embedded in its Basic Law, Hong Kong’s national security framework has widened the state’s power to criminalize speech, association, and peaceful dissent—while allowing juryless trials and designated judges. This verdict doesn’t only punish one man; it signals that “national security” can be used as a pit in which to bury critics.

What’s being done: On November 6, before a Canadian Parliamentary committee, I was honoured to testify together with Jimmy’s son Sebastien Lai, Brandon Silver of the Raoul Wallenberg Centre for Human Rights, Jonathan Stivers of the Committee for Freedom in Hong Kong Foundation (CFHK), and Lai’s lawyer Caoilfhionn Gallagher of Doughty Street Chambers. Raoul Wallenberg Centre Founder and Chair Irwin Cotler also testified December 2. Among other points, we called for Jimmy’s release on humanitarian grounds. I invite you to watch or read their compelling testimonies.

For my part, I advised the Standing Committee that advocacy has to be intensive, repetitive and persistent, and should focus on changing the incentives for Beijing and Hong Kong officials, by raising the reputational and economic costs of holding Jimmy, and encouraging face-saving off-ramps such as medical necessity for release, deportation, or at least transfer to more humane conditions such as house arrest.

CFHK Foundation advocacy concentrates on raising Jimmy Lai’s profile and advocating for policy change that builds global pressure for his release. Read more about their work and Jimmy’s case. CFHK Foundation President Mark Clifford’s biography of Lai, The Troublemaker: How Jimmy Lai Became a Billionaire, Hong Kong’s Greatest Dissident, and China’s Most Feared Critic,” helps keep his name in the spotlight worldwide.

What world leaders can do: Persistently call for Jimmy’s release as a top agenda item in every meeting with Chinese officials, while reassuring that doing so would lead to positive, reputation-enhancing statements. Convey that keeping him in prison will have a chilling effect on diplomatic and business relations, and lead to negative ratings for ease of doing business and rule of law in the territory. Ahead of planned visits to Beijing by the UK and Canadian prime ministers, signal that clemency for Jimmy would set a positive tone for progress on other issues.

What you can do:

• Don’t let Jimmy be forgotten: share updates and keep attention on his health and conditions.

• Ask your representatives to raise Lai’s case in every relevant diplomatic channel—and to coordinate with Canadian, UK, US, EU, and other partners.

• Support organizations advocating for political prisoners, press freedom, and rule of law—like the Raoul Wallenberg Centre and Committee for Freedom in Hong Kong.

• Companies that can take their business elsewhere should let Hong Kong’s government know they’re not happy about the verdict and it will have negative implications for their engagement with Hong Kong.

Update 17 December 2025

China’s Xi Jinping will meet Carney, Starmer and Trump next spring. Clemency for Hong Kong publisher Jimmy Lai should top the agenda. They should make clear that would set a good tone for the meetings.

This week on The Vassy Kapelos Show I offered analysis and suggestions on advocacy to free Mr. Lai. Listen here.

Thanks for reading!

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Updated 16 December 2025

Over the past year, analysts and economists have begun warning of a Second China Shock in which China’s manufacturing overproduction is unleashing a torrent of subsidized exports that’s already further deindustrializing advanced economies and risks preventing emerging markets from fostering infant industries.

China Shock 1.0 hollowed out a lot of basic manufacturing in advanced economies. Now China Shock 2.0 is coming for high tech industries. Grappling with economic weakness at home, the Chinese Communist Party (CCP) is determined to further turbocharge industrial competitiveness and exports in its relentless drive for regime security through national greatness and global primacy—even at the cost of destabilizing the world economy and breaking down the rules-based trading order.

This tectonic shift in trade has huge geoeconomic, geopolitical and geostrategic implications which I’ve been tracking for years but haven’t had time to write much about publicly. As the evidence begins to mount, here’s a quick-and-dirty compilation of key points to kick off a discussion on this monster topic. I welcome your views.

China’s Trillion Dollar Trade Surplus

The latest data indicate China’s accumulated trade surplus (exports minus imports) has kept growing, reaching a new peak of $1.08 trillion by the end of November—higher than the annual total for 2024, and up over 21% year on year, as the New York Times reports. “Strip out imports of energy, food and raw materials, and China is on track this year to post a surplus in manufactured goods of around $2 trillion,” the Wall Street Journal underlines. That’s equivalent to the GDP of Russia, and twice the level in 2020.

In recent years, China’s exports have grown three times faster than global trade.

China’s Gain = Your Manufacturers’ Pain

There are benefits to being able to buy imported products more cheaply, of course. But for domestic competitors, its a big problem. Crucially, China’s beggar-thy-neighbour growth is now coming at the expense of growth elsewhere. This is what the Second China Shock looks like, from a new Goldman Sachs report recently cited in Greg Ip’s Wall Street Journal column:

Goldman forecasts Chinese GDP growth will accelerate by 0.6% annually, in the process reducing the rest of the world’s growth by 0.1% through deindustrialization and crowding out. It says “for 1 percentage point of export-driven boost to Chinese GDP, other economies may see a 0.1 to 0.3 percentage point drag, with high-tech producers like Europe and Japan facing particularly acute pressures… ‘China Shock 2.0’ may crowd out tech-intensive, high-value-added manufacturing.” Without even getting into the implications for society, politics and national security, this upends the traditional neoliberal economic wisdom that importing cheaper goods offsets losses from deindustrialization and delivers a net benefit to the economy. Moreover, state-backed Chinese firms that don’t need to make profits will also deny their foreign competitors the returns needed to invest to drive future productivity and innovation.

Trump’s Trade Deflection

For a deep dive on China Shock 2.0’s impact on the US, read the USCC’s new annual report to Congress, Chapter 8, which says: “as China floods global markets with its goods, it will gain a more dominant share of key markets, gutting foreign competitors and propelling them into a downward spiral of deindustrialization. This in turn will lead to greater control over critical supply chain chokepoints.”

Donald Trump’s extraordinary tariff hikes this year are not only raising prices in the United States, they’re also constricting America’s role as global consumer of last resort. It’s buying less from China.

Check out this Times interactive to see who’s absorbing the surplus. Short answer: everyone else, as the bar chart below shows.

China is Eating Europe’s Industrial Lunch

This is not just a US-China fight. “China now sells more than twice as much to the European Union as it buys,” notes. In Europe it’s set to crush an industrial core of automotive, machinery, and high-tech equipment makers. “The numbers are stark,” writes Reuters columnist . “Over the last 12 months through October, imports of industrial robots from China have risen 171%, while prices fell 31%. Imports of integrated circuits are up 84%, with prices down 6%. Car imports have more than doubled while prices dropped 15%.”

Germany has been a prime target “first as a source of technology, second as a partner through which to export standards favourable to China, and third as a competitor for the lead in the current industrial revolution,” warned a key 2020 report from FDD. “Germany is, in fact, a template for the CCP strategy to dominate the 21st-century economy and set the rules for the modern world,” it concluded. The situation has only grown worse since then, as explains in his book Germany and China and a RUSI commentary. In October 2015, Germany ran a $630 million trade surplus with China. In October 2025 it had a $1.78 billion deficit, a swing of 338% over the decade.

reports Germany’s industrial sector is losing 10,000 jobs a month and the national mood is bleak as its trade deficit with China soars. The wirtschaftswunder is becoming a wirtschaftsblunder. “In order to protect national sovereignty, increase industrial competitiveness and strengthen democratic resilience, some form of disentanglement is in order,” Fulda urges.

Automotive expert reports that Chinese electric vehicle manufacturing is marching into Europe and gutting Western automakers. The EU has imposed various tariffs on Chinese EVs. That’ll be enough, right? Wrong. Look at the bar chart below. They’re not high enough to level the playing field. Moreover, they do nothing to stop European firms’ loss of export markets to Chinese competitors.

Why has Europe been so passive in response? Because its elites are divided, as GMF’s explains in the latest edition of his indispensable “Watching China in Europe” monthly newsletter. He outlines three schools of European thought and paths for how the relationship could evolve: (A) decisively derisk, diversify and deploy all economic policy tools to force China to rebalance the relationship; (B) give in to short-term opportunism and gobble any crumbs China leaves behind in both markets; and (C) a muddled, half-assed mix of the two, with more talk than walk, while China divides and rules, and the outcome is the same as (B) but takes longer. Obviously I’m arguing for Plan A. Paris sounds ready. Berlin is fumbling for a kaffee. The bureaucratic baristas in Brussels need to caffeinate the Continent faster.

Flooding the Global South

For developing countries, it’s no picnic either. For example, as points out, growth in Chinese EV exports leans heavily on the Global South. Dunne warns that “Chinese cars are pouring into Mexico” and its tariffs haven’t stopped them so far. EV imports are forecast to top 500,000 this year. This week Mexico announced tariffs of up to 50% on cars, clothing, appliances, plastics and more from China and other Asian exporters, effective from January.

This is a global problem sparking a global backlash, the WSJ notes. says China’s breaking the rules of global development.

In a triple threat for emerging markets hoping to climb the value chain, General Secretary Xi Jinping insists that even as China reaches the commanding heights of high-tech manufacturing, it must:

1. continue mass low-end manufacturing,

2. restrict tech transfer to foreign enterprises, and

3. keep favouring industry and exports over measures that would boost consumption and imports.

Why? Because, as explains in the FT, “China’s political-economic system cannot countenance scattering resources for individual consumption. A defining feature of such a regime, with a Leninist core, is the mobilisation of resources for social-economic transformation….” The CCP looks at the West and sees “deindustrialisation, over-financialisation, destabilising booms and busts, social atomisation, populist ferment…” and prefers “to mobilise resources to power the ‘real economy’, synonymous in China with manufacturing.”

As Greg Ip correctly observes, the CCP doesn’t believe in balanced trade or comparative advantage. The economist Brad Setser sums it up its philosophy as exporting without importing. Setser also points out that since China joined the WTO, its manufacturing imports have actually declined as a share of its growing economy.

Industrial Completionism

That’s because the CCP’s goal is self-sufficiency through “Dual Circulation” and “Made in China 2025”, creating a “complete” industrial system in a solipsistic, strategic and ideological quest to preserve Party rule, boost Comprehensive National Power and make the PRC sanctions-proof so it can absorb Taiwan, bully its neighbours and face down Trump in trade wars without fear of the sort of repercussions Russia is currently weathering.

describes this in his new book Breakneck as a kind of “completionist” ideology: Xi wants China to be able to make everything itself on its march toward the “great rejuvenation” of the Chinese ethnostate by the year 2049. The Qing emperors would have approved. Likewise Mao. Xi’s ideology remains essentially communist, as he himself defines it.1

For decades, the CCP has been enmeshing China’s heavily planned economy within a global system that it exploits and undermines. Essentially, the state takes money from the people through various means, and gives it to companies, enabling them to export products at prices that undercut competitors. As that already enormous manufacturing capacity expands, the Party-state is counting on exports to absorb the surplus. The problem is becoming structural.

Antisocial Distortion

The IMF’s chief said Dec 10 that China’s too big to base further growth on exports and is long overdue to change its economic model. The IMF recommends strengthening China’s social safety net. But the CCP doesn’t want to because Xi thinks consumers waste money and “welfarism” makes the people lazy when it wants them to work overtime for national greatness. After seeing ballooning entitlement spending cripple Western government balance sheets, he’s intent on avoiding the same trap. So don’t expect the Chinese consumer to ride to the rescue:

How about the property market? Again, no:

The CCP’s success in convincing some foreign liberal and social democratic politicians and others with left-wing political views that it has a fraternal devotion to socialism must be one of the greatest cons in history.2 Its Leninist creed is authoritarian state capitalism.

It’s critical to understand the sheer scale and complexity of PRC industrial intervention and market distortions. Boffins can dive into reports from CSIS, Rhodium Group, and MERICS. For a thin-slice, glance at these two charts from CSIS Big Data China:

And this from a recent IMF working paper that calculates PRC government support for target industries may exceed 4% of GDP—far more than any other country:

Result: manufacturing exports have surged since 2018, while manufacturing imports have declined since 2023. The two are going in opposite directions. As a recent note puts it, “China is no longer a growth market for what most Western economies have to sell.” Hence it’s not a viable substitute for US demand for most goods.

Moreover, there’s no end in sight. As economists such as Natixis’ forecasts, China’s macro outlook of lower growth and plummeting population does not bode well for a rebalancing towards imports and consumption. Nor does its refusal to adjust its currency’s exchange rate. The IMF, Goldman Sachs and others reckon a cheap yuan (renminbi) is exacerbating the problem.

A handful of commodity producers like Australia, Brazil, Canada, and the US have benefitted from growing Chinese imports in food, raw materials and energy (e.g. oil, canola, soybeans, and minerals). And its demand for a few commodities like iron, copper and energy may continue to expand, but most other commodity import growth will likely soon run out of road as the structure of China’s GDP shifts away from infrastructure investment and its population ages and shrinks.

China now leads the world in total number of active robots and surpasses Germany and Japan for robot density. Its production of robots this year is up nearly 30% and accounts for around half of new global installations. They’ve already displaced 14% of China’s workers. Robots are great at making exports, lousy at consuming imports: they don’t fry tofu with canola oil in imported woks while sipping cognac.

This is Why We Can’t Have Cheap Nice Things

But wait, why can’t we just enjoy cheap stuff from China and not worry about making things ourselves? Because as Autor, Dorn and Hanson demonstrated in their research on China Shock 1.0, job destruction brings community disruption, which leads to political problems. It’s a big part of how we got into the current mess.

“The social consequences of the second China shock around the world are likely to be as profound as the first in the West,” the NYT writes. “We’re starting to get a glimpse of what they might look like.” They look like anemic economic growth, disappearing jobs, rising instability, social discontent, political polarization, and populism.

Shouldn’t we welcome cheap solar panels, batteries and more from China to mitigate climate change? Too simple. It’s political economy 101: if there’s no domestic business constituency to support the green transition, it won’t be durable. As writes, “If those subsidies are seen as creating jobs in China instead, our last, best hope of avoiding climate catastrophe will be lost — a consideration that easily outweighs all the usual arguments against tariffs.” In a world where China’s building over 90% of all new coal plants, progress toward net zero has to be balanced with preserving industries and decent jobs. Reality bites.

Mercantilism with Chinese Characteristics

Backed by China’s scale, the Party’s mercantilist policies are deindustrializing advanced economies and erecting barriers to poorer countries ever industrializing. Is the CCP doing this deliberately to weaken Western rivals and suppress their defence industrial bases, or is it just an unintended negative externality of its own political economy and production-centric ideology? Is it just trying to make China run faster, or also kneecap opponents? Given how secretive it is, until we have access to its internal files, that will be debatable. But it certainly seems to regret publicizing “Made in China 2025”.

My hypothesis: it’s a self-inflicted structural problem that the CCP is opportunistically weaponizing. Once it has overcapacity, the PRC government guides and uses it in ways that increase foreign dependence and constrain foreign firms’ market share and ability to produce in key sectors. Add to that its propensity to impose supply chain chokepoints on things like rare earths for coercion and you have a powerful playbook for using economic dependence for leverage.

The CCP’s response? Denial, of course. Its propaganda organs have been running commentaries “debunking” the “myth” and “concoction” of a Second China Shock, and likening it to another bogus “China Threat Theory”. Pro tip: never believe anything until the Party-state denies it.

As wrote last year, manufacturing is a war now. And, adds, China is rewriting the industrial playbook Britain invented. Check the pie chart below. Is this the future we want?

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For policymakers today, both in developed and developing countries, does it matter whether it’s a PRC strategy or only tactics? Either way, it’s essential to act—decisively, comprehensively, and swiftly. In that regard, it’s notable that both the new US National Security Strategy and EU economic security blueprint give heavy emphasis to the intersection of economic statecraft and security. As they emphasize, increasing supply-chain resilience and diversifying trading partners matters more than ever. So does coordination.

Robin Harding in the Financial Times is crystalline: “China is making trade impossible. If it will buy nothing from others but commodities and consumer goods, they must prepare to do the same.” Or else. You don’t see a headline like this every day:

Many are frightened and frustrated—with good reason—but face a collective action dilemma. To survive China’s export tsunami, other governments need to:

1. actually implement existing strategies on China, regulatory reform, industrial renewal, and economic security that too often exist on paper only, and invest more to expand capacity, restore defence industrial bases, boost productivity, human capital, IP, and tech stacks to maintain a technological edge;

2. coordinate and align robust common barriers to PRC dumping such as countervailing duties and quotas, to protect critical industries, while continuing to buy cheap things from China that don’t compete with any domestic products;

3. secure and diversify supply chains for imports, and help emerging markets develop as alternative suppliers, particularly for critical supplies, and expand and diversify markets for export, to reduce dependence on China;

4. require Chinese industrial FDI to include full transfer of technology, process know-how and local employment in return for market access—with tight restrictions for national security, cybersecurity and political influence. But don’t be too optimistic that you can pull off a “reverse Deng” and do to China what China did to the West.

If the WTO can’t be reformed to constrain CCP policy distortions, and China can’t be expelled from the WTO, then it becomes necessary to knit together rules-based trading networks (like CPTPP) that exclude the PRC.

Have I got this right? What do you think? How do we get policymakers to do what must be done?

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