At Davos, China capitalizes on Trump’s mistakes

Hi, readers:

Xi Jinping did not attend Davos this year, instead sending Chinese Vice Premier and top trade negotiator He Lifeng, yet he still emerged as an indirect winner. As Donald Trump unsettled allies with ultranationalist rhetoric, the prospect of tariffs and threats to Greenland, other Western nations openly proposed closer economic ties with China.

Middle Eastern governments watched on, looking to maintain what is a careful balance between the West and China. Saudi Arabia’s minerals minister told Al-Monitor’s Jack Dutton that the kingdom remains “open to investors from both the United States and China,” underscoring Riyadh’s preference for diversification over alignment.

Let’s unpack,

Rosaleen and Joyce (sign up here)

Leading this week

➡️ He Lifeng at Davos 

At Davos, China sought to position itself as a defender of multilateralism and free trade amid mounting criticism of US unilateralism. 

During his address on Tuesday, He Lifeng seemed to take aim at the United States, saying, "The rules must apply equally to everyone. A handful of countries should not enjoy privileges based on their strength, and the world must not return to the law of the jungle."

He added, contrasting China to the United States, that China is "committed to building bridges, not walls."

Against that backdrop, he stressed China’s desire to balance its role as a manufacturing hub with greater participation as a consumer market: "On top of being the world's factory, we hope to be the world's market, too. However, in many cases, when China wants to buy, others don't want to sell. Trade issues often become security hurdles."

While at Davos, He met with President of the Swiss Confederation Guy Parmelin and Vice President of the Swiss Confederation Ignazio Cassis, as well as British Chancellor of the Exchequer Rachel Reeves, who serves as co-chair of the China-UK Economic and Financial Dialogue.

Bloomberg reported on Wednesday that he also met with several top executives, including Apple CEO Tim Cook, JPMorgan Chase CEO Jamie Dimon, Bridgewater Associates founder Ray Dalio, FedEx CEO Raj Subramaniam, and Mastercard CEO Michael Miebach.

Switzerland's president, Guy Parmelin (R), welcomes China's vice premier, He Lifeng (L), before a bilateral meeting on the sidelines of the World Economic Forum annual meeting in Davos on Jan. 20, 2026. (Laurent  Gillieron/AFP via Getty Images)

➡️ Macron's message 🕶️ 

French President Emmanuel Macron was unusually direct in Davos. He told his audience that “China is welcome, but what we need is more Chinese foreign direct investments in Europe, in some key sectors, to contribute to our growth, to transfer some technologies.”

➡️ Mark Carney’s signal

Canadian Prime Minister Mark Carney was equally blunt. In Davos, he said the world is facing a “rupture” in the transatlantic alliance and criticized "economic intimidation." Carney also highlighted his government's new strategic partnerships with China and Qatar.

➡️ Why this matters: How China is capitalizing on Trump’s mistakes

There appears to be a widening gap between Europe’s (and Canada's) pragmatic engagement with China and Washington’s confrontational posturing under Trump.

1. Trump’s nationalist stance and unpredictable diplomacy alienate allies, leaving space for Beijing to present itself as a partner
2. China offers what many governments seek: predictable investment, market access and participation in green supply chains.
3. Europe and key Middle Eastern states are responding by keeping the economic doors open to Beijing.
4. The more volatile Washington appears, the easier it becomes for Beijing to frame engagement as economic incentive for the West.

➡️ What’s next

Expect new agreements focused on green investment, technology partnerships and infrastructure financing that link Europe, the Gulf and China. 

British PM Keir Starmer is set to visit Beijing next week, Reuters reported. Starmer, accompanied by a delegation of representatives from top British companies — including BP, HSBC, Jaguar and Land Rover — seeks to revive a UK-China business council from 2018. (Also notable in the context of Starmer's visit is the UK's approval on Tuesday for China to build what has been described as a "mega" embassy in London.) German Chancellor Friedrich Merz is also planning a trip to China in late February, according to Bloomberg.

The stakes are high. China is the EU’s second-largest trading partner in goods, behind the United States, with bilateral trade reaching roughly $855 billion in 2024, according to EU figures. That year, China ranked as the EU’s third-largest export destination behind the United States and UK, accounting for 8.3% of goods exports, and remained the bloc’s largest source of imports. 

In the Middle East, policymakers and investors are watching these shifts. Gulf states, keen to hedge between Washington, Beijing and Brussels, will see opportunity in closer China-Europe ties. And if Trump continues to alienate allies, China’s narrative of reliability and economic indispensability will only deepen its reach across Eurasia.

Photo of the week

French President Emmanuel Macron (2nd R) welcomes EU Commission President Jean-Claude Juncker (L), German Chancellor Angela Merkel (R) and Chinese President Xi Jinping (2nd L) before a meeting at the Elysee Palace in Paris on March 26, 2019. (Ludovic Marin/AFP via Getty Images)

Deals and visits ✈️

• Saudi minerals minister says kingdom remains open to Chinese and US investment
• China launches rocket carrying Algerian satellite
• Iraq's Midland Oil Company, China's EBS Petroleum complete Iraq's largest horizontal oil well
• US invites China to join Gaza Board of Peace
• China's Minieye Technology partners with Saudi investment firm Ewpartners for robovan deployment
• Egypt's Kemet and China's GCL Suzhou Weicheng agree to develop solar industrial complex
• Saudi-based Arab Energy Fund receives regulatory approval for bond issuance in China
• Hong Kong's financial secretary meets Oman's minister of economy in Davos

What we are reading​​​

• China sees an opportunity in Greenland, but not in the way that Trump thinks: The Guardian
• Real estate crash weighs on China's economic growth: The New York Times
• UK approves China's 'mega' embassy in London: Financial Times