China-EU: How to Revitalize a Genuine Economic Partnership
This article was originally published in Italian on Class on 22nd Jul 2025.
Please note that this is a courtesy translation of the Italian language article originally published on Class Issue at: https://www.classxhsilkroad.it/news/politica-economica/cina-ue-che-fare-per-rilanciare-una-vera-partnership-economica-202507221017274429
EU visit to China: an opportunity to fix lasting trade issues
2025 marks the 50th anniversary of official relations between the European Union (EU) and China. During that time, the partnership between the two blocs grew considerably: from a trade of 2 billion euros annually in 1975, we now see 2 billion euros traded every day, 50 years later. However, this amount is only twice as much as the EU trades with Switzerland.
Incidentally, this year commemorates the 25th anniversary of the European Union Chamber of Commerce in China, which has grown remarkably from 51 European companies to over 1,700 companies spread across 9 locations in China.
This is the context in which top European Commission officials will visit China this week for a meeting with uncertain outcomes. This visit comes at a sensitive moment for the EU and China, both involved in trade tensions with the US. The recent announcement of a 30% tariff on EU imports to the US questions the EU's trade future with China.
At this occasion, the European Union must articulate European businesses' main concerns in China, which face persistent barriers in their operations. Therefore, the EU should persuade Chinese officials that more transparent and predictable regulations are essential. Indeed, European business confidence in China has soared over the years, with only 12% of the Chamber’s members viewing China as a top destination for future investments; this must be addressed. Even in Shanghai, often regarded as China's most international city, only 14% of members consider China a primary destination for current and future investments.
Hence, besides political considerations, with the war in Ukraine most likely occupying a significant part of the discussion, many business aspects should also be addressed. From its last Position Paper, the European Chamber made more than 1,058 recommendations across various sectors to improve the business environment for European companies in China, a consequent increase compared to the 940 recommendations in 2022. Let’s explore a few overarching themes.
Trade deficit
China has the largest trade surplus in the history of humanity. With the EU alone, this surplus has been growing, doubling in ten years to reach around 300 billion euros. Hence, in 2023, the EU was China’s largest export destination for goods, accounting for over 15% of China’s total exports. This trade imbalance is one of the key dynamics contributing to the EU’s increasingly assertive stance towards China over the past half-decade.
One major cause of this imbalance is China’s overcapacity, with an excessive production of goods exceeding domestic and international demand, creating a surplus of goods, with products having to be sold below the market price and increasing competition among producers, leading to price pressures and trade tensions.
In the first half of 2024, officials from the EU and the US consistently raised their concerns about Chinese manufacturing overcapacity, particularly in green technologies, and the impact that underpriced high-tech products could have on their home markets. High-level Chinese officials acknowledged it during both the central economic work conference in late 2023, and the Two Sessions in 2024. However, China’s Ministry of Commerce, Ministry of Foreign Affairs, and even President Xi, later asserted that overcapacity does not exist and that the increase of related exports is due to the fact that Chinese companies are simply more competitive and are fulfilling foreign consumer demand.
Procurement and Market Access Issues
A lack of fair access to government procurement in China has been a longstanding issue for European companies operating in the country. In particular, one of the most striking issues is the ambiguous definition of what constitutes ‘Made in China’ goods. Many European companies that have localised their operations in China to be eligible for public procurement are still unable to participate. For example, the healthcare equipment industry faces soft discrimination in procurement procedures due to discretionary treatment by local officials.
Other examples can be found in the rail sector, where, in China’s tender evaluation methods, state-owned enterprises (SOEs) are awarded one point, joint ventures (JVs) half a point and FIEs no points, ultimately affecting the chance to win competitive bidding processes for FIEs.
Export controls on rare earths and magnets.
In April, China announced export controls on several rare earth elements (REEs) and permanent magnets under the Export Control Law. This change compels exporters to obtain licences before shipping some components containing these elements overseas. While the export controls appear to be a reaction to US tariffs, they impact the export of REEs from China to the rest of the world, including the EU.
This is an example of how the US-China trade war can have significant spillover effects on trade between China and other markets. Although there has been some improvement in the situation since then, with an increase in the number of export approvals that European companies have obtained, this has still not been sufficient to prevent severe supply chain disruptions for many. There is a need for a systematically simpler or faster process to transition from the current fire-fighting mode to a regular, stable, and predictable approval process.
What to expect next?
The US’ current approach has presented China with the opportunity to demonstrate to Europe, and others, that it can be a reliable trade and investment partner. Doing so would boost business confidence in the Chinese market. Part of this would entail providing solutions to long-standing European concerns, including the lack of both reciprocal market access and a level-playing field for its companies, and its growing trade imbalance with China.
The EU will also continue to be mindful of any overdependencies on China in areas that are crucial to its economic security, but this still leaves an enormous amount of potential to deepen trade and investment. The 50th anniversary of the establishment of diplomatic ties between the EU and China—celebrated in May 2025—presented an opportunity for both sides to reinvigorate efforts to create a long-term, sustainable trade and investment relationship. The summit in Beijing this week can be the culmination of this effort if both parties are willing to collaborate.
By: Avv. Carlo D’Andrea, National Vice President of the European Union Chamber of Commerce in China and Chairman of the Board of the Shanghai Chapter，Founder and Managing Partner of D’Andrea & Partners Legal Counsel
