EU Leaders’ Efforts on Trade Imbalance and Russia Ties with China

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EU and Chinese leaders have agreed on the need for a more balanced trade relationship, but have not yet resolved deep-running differences over most issues.  The first in-person summit in four years comes as China’s leadership steps up diplomatic engagement amid an economic downturn, driven by growing geopolitical tensions and the West’s call for economic ‘de-risking’ from Beijing.

European Commission President Ursula von der Leyen and European Council President Charles Michel emphasized that Europe will not tolerate “unfair competition” from China.

The EU currently has a nearly €400 billion trade deficit with China, reflected in restrictions on EU businesses operating there. Both sides discussed the root causes of their trade imbalance, including a lack of access to the Chinese market and preferential treatment to Chinese firms.

Progress has been made 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. Beijing warned the EU that it expects prudence from Brussels when introducing restrictive trade policies.

China has expressed its willingness to make the EU a key economic and trade partner and cooperate on science and technology, including artificial intelligence. However, it urged Brussels to eliminate interference in the bilateral relationship and develop a right perception of each other.

China opposed the politicisation and securitization of economic and trade issues, stating that Beijing could not be held accountable for the imbalance in trade. The Chinese foreign ministry’s European department director general, Wang Lutong, stated that Beijing could not be held accountable for the imbalance in trade.

The talks on Thursday showed no sign of resolving tensions over the EU’s probe into state subsidies behind made-in-China electric vehicles. China resisted EU anti-subsidy investigation on its de-risking strategy, while Italy withdrew from Beijing’s Belt and Road initiative. Experts believe summit aimed to manage differences and prevent confrontation.

The EU has not made significant progress in persuading China to use its influence on Russia to end its war on Ukraine and help stop Moscow from circumventing Western sanctions. The EU officials had emphasized the need to urge Xi to stop Chinese private companies from exporting European-made, dual-use items to Russia. However, there was no indication of movement on the issue of private Chinese re-exports to Russia.

The EU is seen as a crucial player for the initiative to succeed, and the EU wants China to be more assertive, urging Beijing to support the UN Charter and condemn the war caused by Russia against Ukraine. The EU’s position vis-a-vis the Russian aggression toward Ukraine will define its relationship.

The EU is 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. The EU is opposed to any unilateral attempt to change the status quo by force and maintains its One China policy. The EU trusts that China is aware of the serious consequences of any escalation in this area.