European Chamber Chief Urges Concrete Action on EU-China Ties
By Wang Xintong
While the EU-China summit exceeded expectations, tangible progress is still needed to overcome the challenges facing businesses in order to “pave the way for a more equitable trade and investment relationship,” according to the president of the European Union Chamber of Commerce in China (EUCCC).
President Xi Jinping and Premier Li Qiang met with European Council President António Costa and European Commission President Ursula von der Leyen on Thursday for the summit in Beijing. They discussed issues including trade restrictions, the war in Ukraine and China’s industrial overcapacity, according to a press release by the European Council.
Both sides agreed to enhance cooperation on climate change, and improve how they deal with export control disputes.
The summit marked the 50th anniversary of China-EU diplomatic ties, but escalating tensions had dampened expectations of major breakthroughs.
Trade tensions
“We need to ensure that trade never becomes a zero-sum game. Because if it’s a zero-sum game, why trade?” EUCCC President Jens Eskelund said in an interview with Caixin on Tuesday ahead of the summit.
At the summit, both sides agreed to create a better mechanism for how they deal with export control disputes that have hindered shipments of critical raw materials from China.
After Brussels raised tariffs on Chinese-made EVs in late 2023, Beijing retaliated with levies on EU brandy. The two sides also recently imposed tit-for-tat restrictions on medical device sales.
In April, Beijing tightened restrictions on rare earth exports. The European Commission’s von der Leyen condemned the measure, accusing China of using its quasi-monopoly in the sector to undermine competitors in key industries. China accounted for roughly 70% of the world’s output of rare earths last year, and held nearly half of total global reserves, according to estimates by the U.S. Geological Survey.
China’s chokehold on rare earth exports was high on the agenda of the top leaders’ summit. “These export controls have placed significant strain on some European companies,” von der Leyen said at a press conference following the summit. “To keep trust in our trade relationship, we need reliable and secure supply of critical raw materials from China.”
The EU chief believes the updated export mechanism will play a role in this aspect. “If there are bottlenecks, this upgraded supply chain mechanism can immediately check and solve the issue that is out there,” she said.
A key factor driving tensions is the EU’s widening trade deficit with China, which reached 305.8 billion euros in 2024, according to the European Commission.
“Today, the EU accounts for an impressive 14.5% of China’s total exports. Yet China only represents 8% of our exports. These numbers speak to the scale of our relationship. But they also expose a growing imbalance,” von der Leyen said at the press conference. She criticized China’s overcapacity and subsidy policies that have led to cheaper Chinese products flooding the EU market.
The oversupply challenge
Chinese and EU leaders “discussed at length the issue of overcapacity in China’s economy, in crucial sectors like steel, solar panels, electric vehicles and batteries,” von der Leyen said.
The EU Commission president said the Chinese leadership has acknowledged this issue and pledged to support consumption more than production. “This is important,” she noted. “We need to see progress on this issue. Because without, it would be difficult for the EU to maintain its current level of openness.”
Many of China’s industries keep ramping up investment even as it yields ever-diminishing returns, causing repercussions that are taking a toll on the EU, Eskelund said in a statement after the summit. This, he said, is not only contributing to the bloc’s growing trade imbalance with China but also poses a challenge for some European industries.
A survey published by the EUCCC in May showed that European companies’ optimism about their prospects in China has dropped to its lowest level on record.
The oversupply issue is one of the biggest challenges facing China’s economy, Eskelund told Caixin. “Everyone talks about consumption. But actually, there is consumption growth in the market in China,” he said. “The problem is that for many months, we’ve seen that manufacturing output has been growing faster than consumption.”
He called on the Chinese government to tackle the imbalance between supply and demand.
However, while acknowledging that European firms are generally pessimistic about their short-term operations in China, Eskelund said “we are all relatively confident in the longer term,” noting the significant potential in the Chinese market.
In particular, he sees growth opportunities in China’s service sector, suggesting the government further open the sector to more European companies, such as those in finance and legal services, which could create jobs and boost economic growth.
War in Ukraine
The Russia-Ukraine war was another focus of the summit.
“How China continues to interact with Putin’s war will be a determining factor for our relations going forward,” von der Leyen said at the press conference.
The war in Ukraine has had “a direct and dangerous impact on Europe’s security,” she said. “We expressed together our expectations that China would follow up on our concerns and that it would use its influence to bring Russia to accept a ceasefire, come to the negotiation table, enter peace talks and put an end to the bloodshed.”
Brussels has long accused Beijing of supporting Russia in the war, while China maintains that it has not provided lethal weapons to either party in the conflict and has exercised strict controls on exports of dual-use goods that can be used for military purposes.
“China pointed out that the Ukraine issue is not and should not become an issue between China and the EU. We reiterated our consistent and clear position of promoting talks for peace and a political settlement,” Foreign Ministry Spokesperson Guo Jiakun told reporters at a press briefing on Friday.
“China has a little bit of a reputational challenge and a lot of it has to do with what is perceived as Chinese support for Russia, even though China maintains it is neutral,” Eskelund told Caixin.
On Tuesday, China’s Commerce Minister Wang Wentao lodged “solemn representations” to his EU counterpart Maros Sefcovic over two Chinese banks’ inclusion in the bloc’s sanctions against Russia.
The EU’s concern over China supporting Russia has affected trade. In the first half of this year, the number of China-Europe freight train trips fell 3.3% year-on-year to 9,310, while cargo volume dropped 7.4% to 964,000 twenty-foot equivalent units, according to China State Railway Group Co. Ltd.
Zou Xiaotong contributed to this story.
Contact reporter Wang Xintong (xintongwang@caixin.com) and editors Michael Bellart (michaelbellart@caixin.com) and Kelsey Cheng (kelseycheng@caixin.com)
caixinglobal.com is the English-language online news portal of Chinese financial and business news media group Caixin. Global Neighbours is authorized to reprint this article.
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