I actually solved the problem. I used my PC's local IP http://192.168.0.xxx:7000 and the app was able to connect to the chat server from the emulator. I don't know why this works, but it might help out someone in the future :)

Update:

This is how I ended up structuring the project. I created a singleton class to handle socket connections Android side (you could also do it as a service). When receiving a message, the singleton class broadcasts an intent to the rest of the app. The intent is then picked up by a broadcast receiver in the relevant activity.

Android Side (singleton):

public class SocketSingleton {    private static SocketSingleton instance;    private static final String SERVER_ADDRESS = "http://1.2.3.4:1234";    private SocketIO socket;    private Context context;    public static SocketSingleton get(Context context){        if(instance == null){            instance = getSync(context);        }        instance.context = context;        return instance;    }    public static synchronized SocketSingleton getSync(Context context){        if (instance == null) {            instance = new SocketSingleton(context);        }        return instance;    }    public SocketIO getSocket(){        return this.socket;    }    private SocketSingleton(Context context){        this.context = context;        this.socket = getChatServerSocket();        this.friends = new ArrayList<Friend>();    }    private SocketIO getChatServerSocket(){        try {            SocketIO socket = new SocketIO(new URL(SERVER_ADDRESS), new IOCallback() {                @Override                public void onDisconnect() {                    System.out.println("disconnected");                }                @Override                public void onConnect() {                    System.out.println("connected");                }                @Override                public void on(String event, IOAcknowledge ioAcknowledge, Object... objects) {                    if (event.equals("chatMessage")) {                        JSONObject json = (JSONObject) objects[0];                        ChatMessage chatMessage = new ChatMessage(json);                        Intent intent = new Intent();                        intent.setAction("newChatMessage");                        intent.putExtra("chatMessage", chatMessage);                        context.sendBroadcast(intent);                    }                }                @Override                public void onError(SocketIOException e) {                    e.printStackTrace();                }            });            return socket;        } catch (MalformedURLException ex) {            ex.printStackTrace();        }        return null;    }}

Android Side (activity):

public class ChatActivity extends Activity {    super.onCreate(savedInstanceState);    setContentView(R.layout.activity_chat);    IntentFilter newChatMessageFilter = new IntentFilter("newChatMessage");    this.registerReceiver(new MessageReceiver(), newChatMessageFilter);    ...    public class MessageReceiver extends BroadcastReceiver {        @Override        public void onReceive(Context context, Intent intent){            final ChatMessage chatMessage =(ChatMessage) intent.getExtras().get("chatMessage");            runOnUiThread(new Runnable() {                @Override                public void run() {                    mAdapter.add(chatMessage);                    mAdapter.notifyDataSetChanged();                }            });        }    }} 

Server Side:

var express = require('express');var app = express();var server = require('http').createServer(app).listen(1234);var io = require('socket.io').listen(server);io.sockets.on('connection', function(client){    console.log("client connected: " + client.id);    client.on("sendTo", function(chatMessage){        console.log("Message From: " + chatMessage.fromName);        console.log("Message To: " + chatMessage.toName);        io.sockets.socket(chatMessage.toClientID).emit("chatMessage", {"fromName" : chatMessage.fromName,                                                                    "toName" : chatMessage.toName,                                                                    "toClientID" : chatMessage.toClientID,                                                                    "msg" : chatMessage.msg});    });});

I know this not really answers to the OP's posts, but for those who may be interested, this is a tutorial I made to make communicate your Android with a Node.js server -without any additional library- :

https://causeyourestuck.io/2016/04/27/node-js-android-tcpip/

This is a foretaste of how it looks like at the end:

Client socket = new Client("192.168.0.8", 1234);socket.setOnEventOccurred(new Client.OnEventOccurred() {    @Override    public void onMessage(String message) {    }    @Override    public void onConnected(Socket socket) {        socket.send("Hello World!");        socket.disconnect();    }    @Override    public void onDisconnected(Socket socket, String message) {    }});socket.connect();

Puma has already answered on how you can implement a socket connection using SocketIO. This has nothing new to contribute. Yet, it is an attempt to help fellow newbies, as also introduce the implementation of Socket.io's java library.

Socket.IO has its own java implementation on Github, which you can follow along to create a socket application for Android/Java.

Android side:

Include this in your build gradle

compile ('io.socket:socket.io-client:0.8.3') {    // excluding org.json which is provided by Android    exclude group: 'org.json', module: 'json'}

Provide Permission in your app:

<uses-permission android:name="android.permission.INTERNET" />

Android Code:The structure of code is similar to how you would code in Node. The message in socket.on is similar to node's socket.on('message', ...)

import io.socket.client.Socket;import io.socket.client.IO;import io.socket.emitter.Emitter;final Socket socket;try{socket = IO.socket("http://192.168.1.1:8080");socket.on(Socket.EVENT_CONNECT, new Emitter.Listener() {    @Override    public void call(Object... args) {        socket.emit("message", "hi");        socket.disconnect();    }}).on("message", new Emitter.Listener() {        //message is the keyword for communication exchanges    @Override    public void call(Object... args) {        socket.emit("message", "hi");    }}).on(Socket.EVENT_DISCONNECT, new Emitter.Listener() {    @Override    public void call(Object... args) {}});    socket.connect();}catch(Exception e){    }

Node.js side

Create normal sockets using socket.io