EU-China trade relations in ‘slow-motion train accident’: business group

A photovoltaic module company in Hefei, Anhui province, on Feb. 20, 2024.

Future Publishing | Future Publishing | Getty Images

BEIJING — Trade tensions between Europe and Beijing will likely escalate due to China’s growing ability to manufacture more cheaply in strategic industries, according to Jens Eskelund, president of the European Union Chamber of Commerce in China.

“What we see right now is the unfolding of a slow-motion train accident,” he told reporters at a briefing last week.

“Europe cannot just accept that strategically viable industries constituting the European industrial base are being priced out of the market,” Eskelund said. “That’s when trade becomes a security question and I think that is perhaps not fully appreciated in China just yet.”

There needs to be an honest conversation between Europe and China about what this is going to mean.

Jens Eskelund

president, EU Chamber of Commerce in China

Chinese authorities have promoted high-end manufacturing as a way to boost technological self-sufficiency and wean the economy off its reliance on real estate for growth. Investment and state financial support for manufacturing have gone up, while that for property has dropped.

Beijing’s emphasis on manufacturing has prompted concerns about overcapacity — China’s ability to produce far more goods than the country or other countries can absorb can then result in price wars.

Eskelund said the chamber was seeing “overcapacity across the board,” whether in chemicals, metals or electric vehicles. “I’ve met very few companies that do not face it,” he said.

“We haven’t seen all that capacity coming online just yet,” he said. “This is something that’s going to hit markets over the next few years.”

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“There needs to be an honest conversation between Europe and China about what this is going to mean,” Eskelund said, noting that both sides need to find a way to ensure most trade flows aren’t disrupted.

“It is hard for me to imagine that Europe would just sit by and quietly witness the accelerated deindustrialization of Europe, because of the externalization of low domestic demand in China,” he said.

Manufacturing accounts for nearly one-fifth of employment in the EU — making it the largest category. The sector is also the largest contributor to what the bloc calls its “business economy value added,” with a share of nearly a quarter.

The EU was China’s largest regional trading partner until Southeast Asia recently surpassed it. The U.S. is China’s largest trading partner on a single-country basis.

Growing emphasis on security

Eskelund was speaking at a media briefing for the chamber’s report, co-authored with consultancy China Macro Group and released Wednesday, on the growing political risks for European businesses in China.

Despite the EU’s currently targeted policy stance, broader U.S. actions and Beijing’s response have made operations in China more difficult for European businesses, the report said.

The U.S. has cited national security for export…

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EU-China trade relations in ‘slow-motion train accident’: business group

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