Newsletter

EU-China summit remains a ‘dialogue of the deaf’ for EU trade concerns

Publishing date
22 December 2023
Picture of people crossing the street in front of buses
graph

The European Union-China Summit in April 2022 took place online due to zero-Covid policies in China and was influenced heavily by Russia’s invasion of Ukraine only a couple of months earlier. The EU High Representative of the Union for Foreign Affairs and Security Policy Josep Borrell described the event as a ‘dialogue of the deaf’ because of China’s permissive stance towards the conflict in Ukraine. This year’s summit, which took place on 7 and 8 December in Beijing, could also be described as a ‘dialogue of the deaf’ but for a different reason: the increasingly unbalanced trade relations between the EU and China.

EU officials and leaders of key European countries have flocked to China since the G20 summit in Bali in preparation for this year’s EU-China summit. Expectations for this year’s conference were high because of the EU’s perceived grievances that had to be solved. The EU-China High Economic Dialogue, which took place in late September in Beijing, already pointed to the difficulties that could be faced during this summit. This included the very large bilateral trade deficit that the EU has accumulated with China and its increasingly large overcapacity in a growing number of sectors, including in green tech. China’s tight approach to cross-border data transfer has also become one of the main concerns for both foreign and European companies operating in Europe.

China and the EU are close economic partners, trading goods worth €2.3 billion a day. However, the EU’s trade deficit rose to a whopping €400 billion last year. Brussels has repeatedly tried to address structural issues like China’s overcapacity in steel and electric vehicles inundating European markets, hefty subsidies and price distortion, as well as Beijing’s preferential treatment of domestic companies and the limited access of European companies in China’s market.

While those economic concerns dominated the summit, other issues that complicate relations between the EU and China were also raised. The war in Ukraine, China’s potential change in the status quo in the Taiwan Strait, and the human rights violations in Xinjiang and Tibet were all on the agenda. The EU’s position on Russia’s invasion of Ukraine has never been so clear, demanding that China stop providing weapons or dual-use equipment to Russia. The EU even cautioned that some Chinese companies providing such weapons may be sanctioned.

China’s response to the EU’s political, human rights and economic concerns was shallow. Beyond the EU delegation’s demands related to reducing the large trade deficit and China’s overcapacity in various markets being directed to the EU, there are more than 1000 recommendations in the European Chamber 2023 position paper. Rather than accepting those recommendations, Premier Li Qiang warned the European delegation about the politicisation of economic and trade issues and expressed hopes that the European side would be “prudent in introducing restrictive economic and trade policies, and the use of trade remedies”. The EU’s recently launched anti-subsidy investigation against electric vehicles (EVs) produced in China is the obvious target of this comment. 

What is to be expected after a summit where both parties complained about the other without being ready to offer any solution? The fact that the summit even took place is a positive sign given the low level of trust between China and the EU over the last two years. The other positive outcome is that the dialogue will continue, demonstrated by creating new working groups on issues of interest, such as financial regulation. The EU side confirmed their strong expectation that Chinese authorities come with a solution on cross-border data flows.

However, future dialogue is not enough to consider this summit a success as no major – or possibly even minor – agreement was reached. Some key risks remain in place, starting with the most immediate, and probably the most disruptive, which is whether the EU will include a selected number of Chinese companies in the upcoming 12th round of sanctions on Russia because of their exports of dual technology and weapons. The other big risk is that China retaliates by putting pressure on the EU to withdraw its WTO anti-subsidy investigation on EVs.

The most likely retaliation, given steps taken by China in the past, will be to ban exports of critical raw materials to produce green tech. How the EU may react to this potential retaliation is yet to be seen. Finally, China is also dependent on the EU for trade as its largest trading partner (with exports worth €626 billion in 2022). China’s reliance on the EU is even more important at a time when Chinese exports to the US are rapidly shrinking and the Chinese economy is struggling. This explains Beijing’s worries about the EU’s intentions to conduct de-risking policies, which makes the lack of outcomes at this summit even more surprising. Relations can only start improving if both sides begin to listen.

ZhōngHuá Mundus is a newsletter by Bruegel, bringing you monthly analysis of China in the world, as seen from Europe.

Sign up for the newsletter

This is an output of China Horizons, Bruegel's contribution in the project Dealing with a resurgent China (DWARC). This project has received funding from the European Union’s HORIZON Research and Innovation Actions under grant agreement No. 101061700.

EU funded project disclaimer

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.

Related content

Dataset

China Economic Database

Repository of what we consider to be the most relevant macroeconomic data for China and EU-China relations.

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