In China, EU leaders confront Beijing on trade imbalance, Russia ties

11 months ago 40

While EU and Chinese leaders on Thursday (7 December) managed to agree on the need for a more ‘balanced’ trade relationship, they gave little indication of being able to resolve deep-running differences over most issues.

The first in-person summit in four years comes as the Chinese leadership is stepping up diplomatic engagement amid an economic downturn, driven in part by growing geopolitical tensions and the West’s call for economic ‘de-risking’ from Beijing.

Pressing Beijing over the EU’s big trade deficit with the country, European Commission President Ursula von der Leyen and European Council President Charles Michel stressed Europe would not tolerate “unfair competition” from China.

“We need to make our trade and economic relationship more reciprocal and balanced,” Michel said after the EU delegation, which also included EU’s chief diplomat Josep Borrell, met Chinese President Xi Jinping and Premier Li Qiang.

According to EU data, the bloc currently has a nearly €400 billion trade deficit with China, reflected in the restrictions on EU businesses operating there.

Speaking alongside von der Leyen, Michel also said the EU would expect China to take more concrete actions to increase market access for foreign companies.

Trade imbalance looming

Both sides discussed the root causes of their trade imbalance – from a lack of access to the Chinese market and preferential treatment to Chinese firms – to overcapacities in Chinese production, von der Leyen said.

“Politically, European leaders will not be able to tolerate that our industrial base is undermined by unfair competition,” she said.

The Commission chief also said leaders had discussed medical devices, cosmetics and geographical indicators for food products in terms of redressing trade imbalances.

There was “progress” on China’s willingness to clarify restrictions on cross-border data flows that have impacted EU firms operating in the world’s second-largest economy, von der Leyen said.

“I’m glad that we agreed with President Xi that trade should be balanced between the two of us,” she added.

Beijing, meanwhile, warned the EU that it expected prudence from Brussels when introducing “restrictive” trade policies.

Xi said his country is willing to make the EU a key economic and trade partner and to cooperate on science and technology, including artificial intelligence, but both sides should not view each other as rivals or “engage in confrontation”.

The Chinese president urged Brussels to “eliminate all kinds of interference” in the bilateral relationship, adding both sides needed to develop “a right perception” of each other and encourage mutual understanding and trust.

Li said at a separate meeting that China opposed the “broad politicisation and securitisation” of economic and trade issues in violation of the basic norms of market economies, state broadcaster CCTV said.

“We hope that the EU will be prudent when introducing restrictive economic and trade policies and when using trade remedy measures to keep its trade and investment markets open,” Li was quoted as saying.

Beijing “could not be held accountable” for the imbalance in trade, Wang Lutong, director general of the Chinese foreign ministry’s European department, told reporters.

“We are very keen to importing more [products] from Europe, particularly high advanced technologies and high valued products,” Wang said.

However, Thursday’s talks gave no sign of resolving tensions over the EU’s probe into state subsidies behind made-in-China electric vehicles.

China had pushed back against the EU anti-subsidy investigation of the bloc’s “de-risking” strategy to reduce its reliance on Chinese imports, particularly of critical raw materials.

Underlining Beijing’s challenges in wooing European countries, Italy – the bloc’s third-largest economy – this week withdrew from Beijing’s Belt and Road (BRI) initiative.

According to China experts, the summit was largely about managing differences, and preventing a descent into confrontation.

“The EU side achieved its main goal, which was to convey the seriousness of its concerns about imbalances in the trade relationship and China’s support for Russia,” Noah Barkin, a senior visiting fellow at the German Marshall Fund, said.

“But it would be wrong to expect the fundamental economic and political changes from Xi Jinping that the EU is seeking,” he added.

Little progress on Russia ties

Beyond trade issues, there was also no sign the EU had made any progress in persuading China to use its influence on Russia to end its war on Ukraine and to help stop Moscow from circumventing Western sanctions.

EU officials had said in the run-up to the summit that a big focus would be to urge Xi to stop Chinese private companies from exporting European-made, dual-use items to Russia which it could use in its military campaign in Ukraine.

Speaking in Beijing, he gave no indication of movement on the issue of private Chinese re-exports to Russia but urged China to “engage constructively” on Ukraine’s peace plan.

China had welcomed Russia’s President Vladimir Putin to Beijing in October, with Xi hailing their “deep friendship”.

China did not participate in the latest round of national security advisers in Malta in October but is seen as a crucial player for the initiative to succeed.

“We would like China to be more assertive,” Michel said, urging Beijing “to be very clear they support the UN Charter and condemn this war caused by Russia against Ukraine.”

“We have been clear since the beginning of the war that how China will position itself vis-a-vis the Russian aggression toward Ukraine (…) will define also our relationship,” von der Leyen said.

EU ‘concerned’ over Strait tensions

While the meeting agenda contained no mention of Taiwan or human rights violations, EU leaders raised both, according to an EU official.

Michel said the EU was “concerned” about growing tensions around self-ruled Taiwan, which China has vowed to seize one day, and the disputed South China Sea, where Beijing is engaging in a military build-up.

“We are opposed to any unilateral attempt to change the status quo by force,” Michel said, adding: “The EU maintains its One China policy and I trust that China is fully aware of the serious consequences of any escalation in this area.”

“I trust that China is fully aware of the serious consequences of any escalation in this region.”

[Edited by Nathalie Weatherald]