Promote upward balance and forward development of China Europe trade (global hotspot)
Recently, Chinese Minister of Commerce Wang Wentao and European Commission Commissioner for Trade and Economic Security Malos Shevchovich co chaired the second meeting of the China EU Trade and Investment Consultation Mechanism in Beijing. After two days of closed door consultations, the two sides formed a consensus list of 16 achievements covering four major areas: trade and investment balance, export controls, intellectual property rights, and WTO reform. At a time when protectionism is on the rise within the European Union and the rhetoric of a "trade war with China" has been rampant, China and Europe have taken concrete actions to demonstrate that friction is controllable, dialogue is feasible, and a trade war is not in the interests of either party.
The EU's deficit anxiety
For some time now, a figure has been repeatedly hyped up: the EU's trade deficit with China averages over 1 billion euros per day. The President of the European Commission, von der Leyen, has mentioned this number many times. On September 16, von der Leyen delivered his annual union statement, again using the "1 billion euros a day" trade deficit in goods as a speech, declaring that the Sino European trade imbalance has reached the so-called "critical point", and threatening to use "all available tools" to rebalance economic and trade relations with China.
The intuitive basis for the anxiety of the European Union is that its statistical data shows that EU countries are accelerating their transition from surplus to deficit in global trade. Especially from May 2025 to May 2026, there will be a sudden change in the situation. In May 2026, the eurozone's foreign trade deficit in goods reached 7.8 billion euros, while in May 2025, the EU's monthly trade volume in goods was a surplus of 12.7 billion euros. From January to May 2026, the EU's trade balance deficit was 15.9 billion euros, while the same period in 2025 was a surplus of 70.1 billion euros. This directly leads to a sharp increase in anxiety within the EU. "Cui Hongjian, director of the EU and Regional Development Research Center at Beijing Foreign Studies University, analyzed in an interview with this newspaper.
In 2025, the EU will have a trade deficit of approximately 360 billion euros in goods with China, but the EU will maintain a long-term surplus in service trade with China. By 2025, China's service trade deficit with Europe will reach 48.3 billion US dollars, and China will pay billions of US dollars to the European Union for intellectual property usage fees alone. As some comments have pointed out, the real picture of China Europe trade is' surplus in China, profits in Europe '.
In addition, statistical data from the same period shows that the EU's trade surplus with the United States and South Korea has narrowed even faster than with China. However, after weighing the pros and cons, the EU has chosen to focus the pressure of the trade deficit on China. "Cui Hongjian further pointed out that" the change in Germany's attitude is also one of the underlying reasons for the EU's tough attitude. The automotive manufacturing industry is a pillar industry in Germany. As China's electric and hybrid vehicles continue to expand their market share in Europe, there are views within Germany that attribute the layoffs and factory closures of local car companies in recent years to the impact of Chinese electric vehicles. When the narrative logic shifts to the impact of Chinese cars on local core industries, which may even cause political and social instability, Germany, which has always been relatively cautious, has also wavered, thus forming a unified external pressure force of the EU
On October 5th, France and Germany submitted an informal document to the European Commission, requesting new powers to restrict or even cancel access to the European single market for countries deemed to be "disrupting trade relations", which is considered to be "targeting China". On the 7th, the European Parliament passed a resolution urging the EU to use economic tools to pressure China.
What the EU really wants is a tool to quickly solve the trade deficit with China. In recent years, many consensuses and strategies targeting China have been hindered by complex decision-making mechanisms and the difficulty of reaching a majority consensus within member states, resulting in slow implementation. The EU hopes to find tools that can take effect as soon as possible, "said Cui Hongjian.
Shevchovich came with a mission: to rebalance the EU China trade relationship and achieve "tangible, meaningful, and measurable" results to be submitted to the EU Leaders' Summit on October 15-16.
The European side has multiple core demands: narrowing trade imbalances, expanding market access, while paying attention to supply chain stability, rare earth export controls, and other issues. There are a lot of concerns and demands that need to be coordinated between China and Europe, "Ding Chun, director of the Center for European Studies at Fudan University, told this newspaper." The resilience of economic, trade, and investment between China and Europe still exists, but structural competition continues to run parallel. The second meeting of the China Europe Trade and Investment Consultation Mechanism is aimed at institutionalized crisis management and risk reduction
Stable and balanced key trading partners
At the second meeting of the China Europe Trade and Investment Consultation Mechanism, both sides conducted arduous and serious consultations and achieved positive results. This result reflects that both sides respect each other's concerns and are willing to actively handle differences. The consensus reached by both sides not only points out the macro direction, but also has principles, ideas, and specific measures for specific industry and category issues. Both sides have a strong willingness to continue cooperation and avoid a trade war, "said Ding Chun.
On June 29th, the first meeting of the China EU Trade and Investment Consultation Mechanism was held in Brussels. The mechanism initially consists of four working sections: trade and investment balance, export control, intellectual property rights, and WTO reform. The two sides will hold their third meeting in March 2027, during which a ministerial level video conference will be held in January next year.
The China EU trade and investment consultation mechanism itself has significant value. In recent years, the EU has continuously adjusted its policy towards China, shifting the focus of economic and trade to so-called 'fair trade', no longer emphasizing free trade, and prioritizing the enhancement of the EU's own competitiveness. The core of the China EU trade and investment consultation mechanism is for both sides to face current economic and trade difficulties, handle differences, and explore cooperation on this basis. "Cui Hongjian pointed out," The second meeting was very successful. On the one hand, both sides have expressed their intention to avoid conflict escalation, hope the situation cools down, and prevent economic and trade disputes from evolving into trade wars; on the other hand, the consultations have produced concrete results, including negotiations on hybrid vehicle tariffs, export control dialogues, etc
The head of the European Department of the Ministry of Commerce interpreted the results of the second meeting of the China Europe Trade and Investment Consultation Mechanism, stating that both sides reaffirmed the stable and balanced positioning of China Europe as key trading partners, and confirmed that they will handle economic and trade differences and mutual concerns in a balanced manner within the framework of WTO rules, explore deepening mutually beneficial cooperation, and promote upward balance and development of China Europe trade.
There are usually two ways to solve the trade deficit problem. One is a negative 'downward balance', which involves compressing exports, tightening trade, introducing protective policies, and imposing restrictions on products and investment, resulting in a contraction of bilateral trade scale. The other is a positive 'upward balance', which takes into account structural balance on the premise of sustained growth in bilateral trade, adjusts and achieves positive balance in a reasonable pace of development by expanding the market, and ultimately achieves a common improvement in bilateral economic and trade levels. "Ding Chun said," Forward development means that both sides cannot move towards a trade war due to differences and contradictions, and cannot let bilateral economic and trade stagnate or even regress
Compared to the "downward" and "backward" protectionist options such as high tariffs, subsidy taxes, and investment restrictions, "upward" and "forward" mean opening up the market in both directions, relaxing export controls in high-tech, chip and other fields, essentially rejecting protectionism, and making a big economic and trade cake through two-way opening up, rather than relying on tariff barriers to divide interests. "Cui Hongjian said," From the statements made by both sides after this consultation, it can be seen that both sides are willing to resolve differences through cooperation and take care of each other's core concerns. Based on the positioning of "stable and balanced key trade partners between China and Europe", both sides actively seek solutions
Focus on the effectiveness of consensus implementation
As Shevchovich repeatedly emphasized, "This is far from the finish line. It is the crucial first step, but it is only the first step
The next milestone is the EU summit in mid October. If the summit recognizes the results of this consultation, more details on issues such as hybrid cars, export controls, intellectual property, and market opening will gradually be revealed. The key next step is whether consensus can be translated into practical actions. The EU will hold a vote on electric vehicles in November, which is an important observation window. If the EU accepts the results of this consultation and implements the consensus, the November vote is expected to come up with a solution that is acceptable to both sides; otherwise, the electric vehicle dispute may resurface. "Cui Hongjian reminded," Objectively speaking, the trade imbalance between China and Europe is not unilaterally caused by China, and the EU's narrative and policy logic, which is not purely based on economic considerations, also exacerbates the complexity of solving the problem. It is impossible to completely solve it through one or two consultations, but as long as the correct direction is maintained, Divergence can be effectively managed
The negotiations are looking for a mutually acceptable suboptimal solution to avoid a lose lose situation. The second meeting reached a 16 point consensus, providing feasible arrangements and avoiding a vicious escalation of friction. However, the trade deficit between China and Europe is a structural problem that cannot be solved overnight. The focus in the future will depend on the effectiveness of implementation. China and Europe will discuss, cooperate, and control differences while working within the framework of the trade and investment consultation mechanism. "Ding Chun said," Behind the trade deficit is the rise and fall of industrial competitiveness. The fundamental way for Europe is to enhance its own industrial competitiveness
There are also voices in Europe that believe that internal diseases should not be treated externally. The German newspaper Frankfurter Allgemeine Zeitung put it bluntly: strengthening Europe's own strength is the hard truth. An article on the website of the German newspaper Berliner Zeitung pointed out that the European Commission itself has listed the problems that exist in the EU economy: weak productivity growth, high energy costs, unfavorable population structure, and insufficient investment. The report released by BNP Paribas on October 5th pointed out that trade rebalancing cannot be achieved solely through trade means. The report suggests that in order to truly address the EU's trade imbalance, efforts need to be made in other areas, with two particularly crucial aspects. The first is research and development investment. The second is to deepen the construction of the European single market. Europe must drive transformation internally, significantly increase investment, expand economies of scale, and promote diversification of export markets.
In July of this year, when discussing the prospects of China Europe trade, the relevant person in charge of the Ministry of Commerce stated that China is not the root cause of the EU's economic and trade problems, but a partner in solving them. In the first half of this year, the total trade volume of goods between China and the European Union increased by 14.2% year-on-year, reaching 447.88 billion US dollars. There is enormous potential for cooperation between the two sides in areas such as service trade, technological innovation, and green economy.
EU companies are also optimistic about the opportunities in China. A survey released by the European Union Chamber of Commerce in China in May showed that 68% of surveyed companies choose to maintain or expand their business in China.
From a global perspective, the total economic output of China and Europe exceeds one-third of the world's total economic output, and the trade volume exceeds one fourth of global trade. At the second meeting of the mechanism, both China and Europe agreed that a stable and healthy China Europe economic and trade relationship not only benefits Chinese and European enterprises and people, but also injects certainty and positive energy into global economic growth and stable supply chains.