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The European Union's commissioner for trade emphasized that China's unjust trade practices have compelled the bloc to adopt a more assertive approach in their interactions with the second largest economy worldwide. This statement was made by the commissioner during their visit to Beijing on Monday.
Europe is not planning to sever ties or pursue self-reliance or import substitution, according to Valdis Dombrovskis in a keynote speech at Tsinghua University. Dombrovskis emphasized the need for China to address the economic reciprocity issue and stated that while the EU welcomes competition, it must be fair, and they will take a more assertive approach in addressing unfair practices.
The visit of the trade chiefs occurs amid escalating tensions between the bloc and China regarding trade imbalances and geopolitical matters. Last year, the trade deficit between the bloc and China reached 396 billion euros ($421 billion), marking a historic high, as stated by Jorge Toledo, the EU ambassador to China, according to Reuters.
Statistics from the EU reveal that half of this deficit can be attributed to vehicles and machinery, while the remaining portion accounts for other manufactured goods, chemicals, and energy.
Earlier in the month, the European Union initiated a probe into China's state-backed aid to electric vehicle (EV) manufacturers amidst concerns over the surge in imported Chinese cars and its potential impact on the future of European auto makers. Describing the investigation as "blatantly protectionist," China's commerce ministry responded to the EU's actions.
On September 4, 2023, at the prelude to the 2023 Munich Auto Show IAA Mobility in Munich, Germany, a view captured the display of the BYD ATTO 3, a model by the Chinese automobile manufacturer, BYD. The photo credit goes to Leonhard Simon of Reuters.
Europe is currently investigating China's subsidies for electric cars as the import of these vehicles continues to rise. Additionally, there are tensions in the technology sector, with China imposing export restrictions on two semiconductor materials as a warning to Europe and the United States. These restrictions come as a response to the imposed limitations on China's access to advanced chipmaking technology.
The EU, meanwhile, has expressed wider concerns about the business environment for European companies operating in China and the countrys stance in the Ukraine war.
Less transparency
Dombrovskis asserted that the Chinese government has fostered a business environment that is increasingly influenced by politics, as it expands its repertoire to safeguard national security interests. In his statement, he highlighted the consequences of these measures, which include diminished transparency, uneven procurement access, the enforcement of discriminatory standards and security prerequisites, and obligations pertaining to data localization and transfer.
Dombrovskis expressed significant concern regarding China's new foreign relations law and its recently expanded counter-espionage law, specifically in relation to European business.
In April, China further extended the reach of its already comprehensive counter-espionage law, which has raised concerns among analysts about potential legal risks and uncertainties for foreign companies operating in the country.
Two months later, a comprehensive foreign relations law was introduced that solidifies the authority to implement "countermeasures" against perceived threats. This move was interpreted as Beijing's recent attempt to strengthen its stance in light of strained relations with Western countries. Dombrovskis further emphasized that the lack of clarity in these laws poses challenges for European businesses in understanding their compliance responsibilities.
The trade chief referred to a June survey conducted by the EU Chamber of Commerce in China. The survey revealed that nearly two-thirds of respondents, which is a record high, stated that conducting business in the country had become increasingly challenging.
Based on the chamber's findings, 30% of respondents reported a decline in revenue compared to the previous year. This showcases a significant increase of 20 percentage points, marking the highest reported decrease on record.
Dombrovskis urged China to maintain an open stance to facilitate its shift from an investment-driven economy to a more diversified one. "However, should China opt for a different course, it could impede the necessary economic readjustment," he warned.
Since the full-scale invasion of Ukraine by the Kremlin in February 2022, Russia has progressively grown more reliant on China.
Chinese customs data shows that trade between the two countries increased by 40% in the first five months of this year. President Vladimir Putin recently commended the strong economic ties between China and Russia. Lucas Liliholm and Manveena Suri provided reporting for this article.
