China and Europe try to dial down trade tension

China and the European Union have reached an agreement to share information regarding export controls, aiming to alleviate tensions related to trade imbalances and geopolitical matters. The European Union's trade chief emphasized that the current relationship stands at a critical juncture, with EU exporters seeking improved access to the world's second-largest economy.

Valdis Dombrovskis, in a statement, stressed the need to rebalance the relationship to ensure mutual benefits, emphasizing transparency, fairness, predictability, and reciprocity. He expressed satisfaction with the progress made in addressing certain market access issues.

Furthermore, both parties have agreed to enhance transparency concerning supply chains for raw materials and are contemplating the establishment of a new mechanism to achieve this goal, as outlined in the statement issued by the European Commission on Monday.

Dombrovskis is concluding his visit to Beijing, during which he held discussions with Chinese Vice Premier He Lifeng. The focus of their collaboration will revolve around the flow of agricultural products and alcoholic beverages. China has also committed to addressing a backlog of applications for infant formula licenses, according to the Commission.

Following their meeting, He conveyed China's willingness to increase imports from the EU and expressed hope that Europe would lift restrictions on the export of high-tech products to China.

Recent times have witnessed a deterioration in bilateral relations, particularly as the European Union initiated an inquiry into China's state support for electric vehicle (EV) manufacturers. This investigation comes in response to concerns about the surge in car imports from China, which have raised apprehensions about the future of European auto manufacturers. China's commerce ministry criticized the investigation as "blatantly protectionist" earlier this month.

Hours before his meeting with He, Valdis Dombrovskis emphasized that China's trade practices have compelled the European Union to adopt a more assertive approach in its interactions with the world's second-largest economy. Speaking at Tsinghua University, he underscored the crossroads at which they stand, offering two paths. One path entails nurturing mutually beneficial relations founded on principles of open, fair trade, and investment, while the other path leads to a gradual estrangement.

In the previous year, the EU faced a trade deficit with China amounting to 396 billion euros ($421 billion), marking the "highest in the history of mankind," according to Jorge Toledo, the EU ambassador to China. A significant portion of this deficit stemmed from vehicles and machinery, with the remainder attributed to various manufactured goods, chemicals, and energy, as per EU statistics.

The importation of Chinese cars has emerged as a contentious issue, causing concern among European automakers.

Moreover, tensions have strained technology supply chains, with China imposing export restrictions on two semiconductor materials in response to limitations imposed by Europe and the United States on China's access to advanced chipmaking equipment.

Simultaneously, European businesses have expressed unease regarding China's business environment, fearing it has become more politicized and unpredictable, as highlighted by Dombrovskis during a press conference. He noted that China's stance on the conflict in Ukraine has also impacted the country's image, not only among European consumers but also among businesses contemplating investments.

Dombrovskis conveyed difficulty in comprehending China's position on the Ukraine conflict, emphasizing Moscow's growing reliance on Beijing since its full-scale invasion of Ukraine in 2022. Trade between Russia and China has surged this year, although China maintains a stance of neutrality, expressing a desire for peace in Ukraine.