Key Issues between the EU and China

EU leaders met with President Xi Jinping in Beijing to discuss trade and economic issues, particularly China’s industrial overcapacity and its impact on European markets. The EU is concerned about China’s increasing industrial capacity, particularly in renewable energy products, as it results in trade imbalances and limited access to Chinese markets for European businesses.

China’s state subsidies and barriers to foreign companies have contributed to these issues. The EU wants to reach a compromise with China on trade disagreements rather than resorting to unilateral measures. Chinese manufacturing overcapacity is fueled by data showing that state banks are cutting new lending to China’s debt-stricken property sector and instead targeting industries such as electric vehicles. The EU is hopeful that China is realizing the negative consequences of overcapacity and is willing to address the issue.

During the meeting, Ursula von der leyen and Charles Michel emphasized the importance of fair and open trade, urging China to address its industrial overcapacity and create a level playing field for European businesses. They called for greater market access and urged China to reduce its state subsidies, which have been distorting global markets. The EU also expressed concerns about intellectual property rights and urged China to strengthen its enforcement mechanisms in order to protect European companies.

China, on the other hand, dismissed many of Europe’s complaints about trade imbalances and defended its economic practices. Chinese officials highlighted their country’s early investments in industries such as electric vehicles and emphasized the innovation that has driven their economic success. They urged the European Union to view China as a partner rather than a rival, highlighting the potential for mutually beneficial cooperation.

Nevertheless, tensions between China and the EU have been escalating. The EU recently introduced restrictions on trade with Chinese firms, citing concerns over unfair competition and security risks. Additionally, the European Commission launched an investigation into whether Chinese electric car manufacturers received government subsidies, which could be seen as a violation of international trade rules.

The EU’s labeling of China as a “strategic rival” reflects a shift in its approach towards Beijing. European leaders have increasingly voiced concerns over issues such as human rights abuses, intellectual property theft, and unfair trading practices. These concerns have led to a more assertive stance against China’s economic influence and growing global ambitions.

The key points to take away from this meeting are:

• The summit is expected to yield little in terms of concrete progress, with low expectations for outcomes such as joint statements or deliverables.
• Market access issues, including China’s trade surplus with the EU, are on the agenda, but prospects for progress appear dim.
• During the summit, European leaders also expressed concerns over China’s support for Russia, particularly in circumventing sanctions imposed by the international community. They called on China to play a more constructive role in resolving global conflicts and upholding international norms.
• Lowering expectations for the summit may serve to reinforce China’s propaganda and rhetorical purposes, while continuing engagements with the EU allows China to demonstrate responsible engagement with an important economic partner.
• Despite the limited expectations, the EU-China summit serves as an important platform for dialogue and engagement between two major global powers. Both sides recognize the significance of their relationship, which encompasses not only economic ties but also areas such as climate change, global governance, and security challenges.
• The EU has been increasingly concerned about China’s assertive behavior in the South China Sea, human rights issues, and its influence in Europe through economic investments and infrastructure projects. These concerns have led to a more cautious approach towards China, with the EU striving for a more balanced and reciprocal relationship.
• On the other hand, China recognizes the EU as a key partner for trade and investment, as well as a potential counterbalance to the United States. China has been keen to strengthen its ties with the EU, particularly amid escalating trade tensions with the US.
• While significant progress may not be achieved in this particular summit, it provides an opportunity for both sides to discuss their concerns, identify areas of mutual interest, and lay the groundwork for future cooperation. The EU raised issues related to market access, intellectual property protection, and a level playing field for European businesses operating in China.
• Ultimately, the EU-China summit signifies ongoing efforts by both sides to navigate their complex relationship. While disagreements and challenges exist, maintaining open lines of communication is crucial for finding common ground and promoting stability in an increasingly interconnected world. This is a positive step and follows up on the recent meeting between Biden and Xi.

In seperate news, Italy annouced a decision to pull of the Chinese Belt and Road Initiative (BRI). Prime Minister Giorgia Meloni made the annoucement to pull out noting that Italy was the only member of the G7 to have joined. This decision was made by the previous government in Italy.

For China, this is certainly negative news. For Prime Minister Meloni, the decision to join the BRI was a ‘serious mistake’ and she had made these statements even before coming to power. In short, for countries in the EU only the EU can represent them in trade negotiations. The prior Italian government joined the BRI as a snub to the EU and for domestic political reasons. It raised lots of eyebrows in Europe at the time. Also, the BRI has not delivered the projects promissed when the agreement was made and this has dissapointed the Italian business community.