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EU raises list of trade complaints with China at bilateral summit

Brussels sought to address the $431 billion trade deficit and called on China to influence Russia to stop the war in Ukraine

China-UE
Chinese President Xi Jinping (C) poses for a photo with President of the European Council Charles Michel (l) and President of the European Commission Ursula von der Leyen (r) during their meeting on the sidelines of the 24th China-EU Summit, at the Diaoyutai State Guesthouse in Beijing, China.XINHUA / Huang Jingwen (EFE)

The European Union and China are holding talks in Beijing on Thursday amid global conflicts and rising tensions. But there is no expectation that the meeting will make a significant geopolitical impact, as it is seen as a mere formality for both sides.

The EU is coming into the meeting with a long list of trade complaints, while continuing to call on China to influence Russia to end the war in Ukraine. For China, which is still trying to boost the economy after the pandemic, maintaining good relations with one of its main export destinations is key.

A top priority for the EU is the trade deficit, which has doubled in two years, reaching $431.7 billion at the end of 2022. For Brussels — which has been following a policy of risk reduction since the Covid-19 pandemic and the war in Ukraine — this deficit has become a real headache. European Commission President Ursula von der Leyen announced in September an investigation into China’s alleged subsidies to the electric car industry. The Chinese government, which has been supporting the sector for years, argued the probe was pure “protectionism.”

An EU source told EL PAÍS that Brussels believes the causes of the deficit are largely due to “the lack of access of European companies to the Chinese market, hidden subsidies, intellectual property protection issues, but also with the overcapacity” of the Chinese industry. This has been compounded by the decision of several countries — the United States, Japan, India, South Korea — to increasingly close off fields in which China has excess production (for example, those linked to the energy transition, such as solar panels, wind turbines and heat pumps) and to the slack internal demand in China. The situation has put growing pressure on the EU market and could put it in an “extremely complicated” situation, said the aforementioned source.

Brussels believes there is room for China to address this overcapacity by increasing domestic demand, reducing production targets and subsidies, and giving EU companies greater access to its market. If action is not taken, the EU may be “forced to use more defensive tools” that it “would like to avoid,” said the source.

Another issue is China’s relationship with Russia. Beijing has not broken relations with Moscow, and the EU is demanding that it take serious measures to prevent exports of its dual-use products (goods for civilian use that may have military functions). If this does not happen, the EU has raised the possibility of sanctioning Chinese companies that export these goods. At the moment, there are a dozen companies that may face sanctions, according to EU sources. The EU has so far accepted China’s promise that it will ensure Chinese companies prevent such exports, which is the “preferred option,” according to a high-ranking source in Brussels.

Ahead of the meeting, China made diplomatic overtures to the EU. Last week, it allowed the visa-free entry of businessmen and tourists from five EU countries (France, Germany, the Netherlands, Italy and Spain), a move the EU Chamber of Commerce viewed as “positive.” During a meeting on Monday with diplomats from the EU and its member states, Chinese Foreign Minister Wang Yi said that the “bilateral relationship between China and the EU has shown a good momentum of recovery and steady progress.” “China and EU should make joint efforts to ensure the success of the summit and push China-EU relations to a new level with new prospects,” Wang added, according to Xinhua agency.

Thursday’s summit comes after Chinese President Xi Jinping met with U.S. President Joe Biden in San Francisco in November, a meeting that Beijing viewed as a sign that the strained relations between the two were stable. Ahead of the EU summit, however, the Global Times, the hard wing of the state press, demanded that Brussels stop positioning China as “a partner, competitor and systemic rival.”

Alicia García Herrero, chief economist for Asia-Pacific at the investment bank Natixis, believes that China feels “comfortable” following its meeting with the United States. “It has bought itself time,” she argued, adding that the EU meeting is not likely to lead to any big announcement.

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