How Much Longer Is It Worth It? EU Chamber of Commerce Expresses Concern About Trade With China

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In light of a growing trade imbalance with China, the EU Chamber of Commerce believes that a time for rethinking the situation is not too far off...

What is causing concern, according to Chamber President Jens Eskelund in Beijing, is that developments in trade with China raise some fundamental questions. When conducted properly, trade creates value and efficiency for both sides. But if that were true only for China, the question automatically arises: why should trade even continue at all? The Dane pointed to China’s trade surplus with Europe, which is estimated at one billion euros per day. The Chamber has also long criticized the competitive conditions in the People’s Republic. According to Eskelund, the focus should not be solely on the success of European companies in China, but also on stable trade conditions. After all, Europe must also benefit from this. Consequently, there is greater consensus within the EU regarding the challenge that China poses to European industry.

Beijing and Brussels Certainly Share the Same Views

Brussels and Beijing are currently negotiating their trade dispute. Solutions are expected in October. New EU tariffs have also been under discussion. At the same time, Eskelund warned: “I’m a little concerned that China may not yet fully understand that something is changing in Europe! Something that will ultimately enable Europe to take countermeasures!” In a new position paper containing 1,096 policy recommendations, the advocacy group representing over 1,600 EU member companies operating in China noted that Beijing’s and Brussels’ security concerns even overlap in some areas. The paper notes that the EU, too, is working on a policy framework to ensure its autonomy, industrial resilience, and competitiveness. It goes on to say that striking a healthy balance between areas involving economic security and those where greater openness for businesses is possible could improve the development of both economies.

Weak Chinese Consumer Spending Is Weighing on Business

A long-standing—but particularly significant—problem for foreign players is the ongoing unhealthy price competition in China. As a result, China is steadily transforming from a sales market into an export hub for foreign companies. In doing so, they are taking advantage of the strong supply chains in the People’s Republic and the rapid pace of development. However, weak Chinese consumer demand remains a problem. The Chamber therefore believes that strengthening demand while simultaneously adjusting to actual supply would be helpful. Accordingly, in strategically promoted industries, production capacity is growing faster than demand. In addition, so-called “zombie companies”—which are no longer operating profitably and should be restructured or forced out of the market—are being kept afloat by local governments. The rationale behind this approach is to secure jobs and the hope that these virtually defunct companies will still emerge from the fierce competition as industry leaders.