First glance

Why the European Union-China summit is bound to disappoint

The European Union is increasingly disappointed with China over trade.

Publishing date
04 December 2023
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The last summit between the European Union and China – in April 2022 – was tense. It took place by videoconference soon after Russia’s invasion of Ukraine, towards which China has adopted a permissive stance. The next summit, on 7-8 December in Beijing, is unlikely to be easier, though this time trade could be the dominant issue. 

In particular, the expected benefits of a reopened China for Europe, after three years of zero-COVID-19 policies in China, have not materialised. On the contrary, trade relations, which used to be balanced before COVID-19, are now very much in China’s favour with a €400 billion bilateral surplus with the EU.

The EU, a large net exporter, does not have a similar trade imbalance with any other large economy. For EU officials, this is evidence of poor access to the Chinese market, with many sectors still closed to foreign competition. It also signals China’s aggressive industrial policy, which is seen by the European Commission as unfair competition, given the large subsidies given by China to vital industries that compete with European ones – and not only in China, but increasingly in the EU and third markets.

The lack of market access is also increasingly clear in the negative growth of China’s imports for many months, notwithstanding the reopening of the economy. One major reason for plummeting EU exports to China is China’s localisation requirements, which make it very difficult for foreign companies to continue to rely on their external suppliers. Their substitution with Chinese domestic suppliers, a key objective of China’s landmark industrial policy, Made in China 2025 in a bid for self-reliance, is an important reason for the reduction in Chinese imports. 

Meanwhile, China’s dominance of green tech, especially solar panels and electric vehicles (EVs), has led to a massive increase in EU imports from China. In solar panels, China global export share is 90%, while the EU industry had been destroyed since subsidies were lifted in the aftermath of the EU sovereign crisis in 2010-12. However, imports of EVs from China are much harder to swallow for the EU since the auto sector remains one of the EU’s top industries, with over 14 million jobs. This is probably why the EU has filed an anti-subsidy investigation with the World Trade Organisation against EVs produced in China and exported to the EU. This investigation will surely be the subject of complaint by Chinese officials during the summit, but it seems unlikely the EU delegation will give any signals of backing off. 

The EU’s tougher stance might not yet be fully appreciated by the Chinese, who are used to the EU’s easing its positions in previous investigations, such as the 2014 anti-dumping investigation into solar panels. This time, the European Commission is expected to remain firm, given the much greater importance of the auto sector for Europe and the likely absence of counter offers from the Chinese side.

The EU Chamber of Commerce in China proposed in September over 1000 recommendations to ease barriers to market access to EU companies. China could draw from these, but this is unlikely to happen for two reasons.

First, the Chinese economy continues to underperform given underwhelming consumption and investment. A large trade surplus has become increasingly important as a source of growth and also to stem the negative impact on the balance of payments of large capital outflows and, thereby, on the value of the renminbi and on overall confidence in the economy.

Second, China has interpreted the 15 November Biden-Xi summit in California as a success in stabilising relations with the US. Regained confidence in China’s relations with the world’s most important nation will make Chinese officials less willing to offer to Europeans market access that the US may not have obtained.

Increasingly anxious requests from the EU side to rebalance its relationship with China are bound to clash with China’s self-confidence after the Biden-Xi summit. But there is also little space for China to offer more imports given the weakness of its economy and the need for a trade surplus. The EU-China summit is thus bound to disappoint, again.

About the authors

  • Alicia García-Herrero

    Alicia García Herrero is a Senior fellow at Bruegel.

    She is the Chief Economist for Asia Pacific at French investment bank Natixis, based in Hong Kong and is an independent Board Member of AGEAS insurance group. Alicia also serves as a non-resident Senior fellow at the East Asian Institute (EAI) of the National University Singapore (NUS). Alicia is also Adjunct Professor at the Hong Kong University of Science and Technology (HKUST). Finally, Alicia is a Member of the Council of the Focused Ultrasound Foundation (FUF), a Member of the Board of the Center for Asia-Pacific Resilience and Innovation (CAPRI), a member of the Council of Advisors on Economic Affairs to the Spanish Government, a member of the Advisory Board of the Berlin-based Mercator Institute for China Studies (MERICS) and an advisor to the Hong Kong Monetary Authority’s research arm (HKIMR).

    In previous years, Alicia held the following positions: Chief Economist for Emerging Markets at Banco Bilbao Vizcaya Argentaria (BBVA), Member of the Asian Research Program at the Bank of International Settlements (BIS), Head of the International Economy Division of the Bank of Spain, Member of the Counsel to the Executive Board of the European Central Bank, Head of Emerging Economies at the Research Department at Banco Santander, and Economist at the International Monetary Fund. As regards her academic career, Alicia has served as visiting Professor at John Hopkins University (SAIS program), China Europe International Business School (CEIBS) and Carlos III University. 

    Alicia holds a PhD in Economics from George Washington University and has published extensively in refereed journals and books (see her publications in ResearchGate, Google Scholar, SSRN or REPEC). Alicia is very active in international media (such as BBC, Bloomberg, CNBC  and CNN) as well as social media (LinkedIn and Twitter). As a recognition of her thought leadership, Alicia was included in the TOP Voices in Economy and Finance by LinkedIn in 2017 and #6 Top Social Media leader by Refinitiv in 2020.

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Alessia Amighini, Alicia García-Herrero, Michal Krystyanczuk, Robin Schindowski and Jianwei Xu