Wall Street Times

Navigating a Pivotal Moment: The China-EU Relationship

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In the heart of Beijing, an essential dialogue unfolds, one that could potentially redefine the future of China’s relationship with the European Union. Valdis Dombrovskis, the executive vice president of the European Commission, recently delivered a thought-provoking address at Tsinghua University, where he articulated the significance of the current juncture. With the China-EU trade deficit hovering around 400 billion euros in 2022, Dombrovskis emphasized the need for increased openness and fairness in trade dealings between the two global powerhouses.

Valdis Dombrovskis’ Call for a Pivotal Decision

Dombrovskis’s words echo a pivotal moment in the China-EU dynamic. He presented two distinct paths, each with profound implications. The first path advocates for mutually beneficial relations built upon the principles of open and fair trade, collaborative investments, and joint efforts to tackle global challenges. This path embodies the shared prosperity of recent decades.

Balancing Trade and Mutual Benefit

Conversely, the second path hints at a gradual drift, where the shared benefits of the past erode, leading to reduced opportunities for both the people and economies of China and the EU. This divergence, if unchecked, could jeopardize the collaborative spirit that has long characterized their relationship.

The EU’s Concerns and China’s Perspective

Dombrovskis’ address comes in the wake of concerning data that illustrates the EU’s trade deficit with China. While the EU recorded a record bilateral trade volume of 865 billion euros with China in 2022, it also grappled with a trade deficit approaching 400 billion euros. This imbalance raises questions about the fairness of trade practices.

Moreover, Dombrovskis’s visit coincides with the European Commission’s investigation into Chinese subsidies provided to electric car manufacturers. While the EU asserts that these subsidies disrupt the European market, Beijing decries what it perceives as “protectionist” sentiments from Brussels. Dombrovskis seeks to clarify that the probe aims to foster fairer trading practices rather than sever ties with China.

De-risking, Not Decoupling – A Strategic Approach

Crucially, Dombrovskis introduces the concept of “de-risking” as opposed to “decoupling.” This approach signifies a nuanced effort to reduce strategic dependencies selectively while preserving open strategic autonomy. European officials emphasize that their intention is not to completely sever ties with China, aligning themselves with a similar sentiment from the United States, as evidenced in a statement by the Group of Seven.

Innovation and Challenges in the Electric Vehicle Sector

One sector where de-risking is particularly pertinent is the electric vehicle (EV) industry. The proportion of China-made EVs sold in Europe has risen to 8% in the current year, with projections indicating a potential 15% share by 2025. These developments are of utmost significance, given Europe’s commitment to end the sale of new diesel and petrol cars by 2035.

European automakers have established factories in China, with up to 95% of their production value chain based in the country. This scenario raises concerns about a potential influx of “100% produced-in-China” imports into Europe.

Navigating Challenges Through Dialogue

Jens Eskelund, president of the European Union Chamber of Commerce in China, urges both sides to engage in constructive dialogue to resolve these issues without resorting to punitive tariffs. He emphasizes the profound interests that bind Europe and Beijing, underlining the importance of addressing barriers through diplomatic channels.