Deepening trust between China and the EU is what Xi suggests.

Deepening trust between China and the EU is what Xi suggests.

The EU and China recently held a summit in Beijing, marking 50 years of diplomatic ties between the two entities. However, the meeting was overshadowed by deep-rooted trade issues and geopolitical concerns.

The EU's primary concern revolves around the significant trade imbalance with China. Over the past decade, the EU's trade deficit with China has more than doubled, reaching over €300 billion euros recently. The EU insists that for trade to remain mutually beneficial, the imbalance must be addressed. Brussels has warned that it cannot continue to keep markets open to Chinese goods unless China takes steps toward a more balanced trade relationship.

European businesses are also frustrated by China’s limited market openness and restrictive export controls. The recent EU-China summit highlighted ongoing tensions because China has not substantially relaxed these restrictions. For example, China uses export licensing for critical materials like rare earths to maintain leverage, and the EU demands more transparency and freer access for its companies.

Another point of contention is China's industrial subsidies, which the EU argues create an uneven playing field that disadvantages European firms. The EU pushes China to reduce such subsidies to ensure fair competition. These concerns are implicit in the EU’s push for a “rules-based trade” framework.

The EU separately criticizes China's support of Russia amidst geopolitical tensions. This relationship complicates EU-China relations and is an additional point of divergence. The EU has referenced China’s backing of Russia as a source of friction and a factor preventing full cooperation.

Regarding real solutions being discussed, the summit produced limited concrete outcomes but some progress in specific areas, notably agreements related to China’s export restrictions on rare earth elements. China agreed to curb export limitations somewhat and 'up export supply,' but these steps were seen as insufficient by many European companies who expected deeper market opening and relief from stringent controls.

China, on the other hand, pushes a narrative of mutual benefit and collaboration within a multipolar global economic order, aiming to position itself as a peace advocate amid global tensions. It hopes to undercut EU “de-risking” efforts and maintain market access as important for its economic stability.

The EU is simultaneously developing stronger transatlantic trade relations, which affects geopolitical dynamics influencing EU-China negotiations. Chinese President Xi Jinping and EU's top officials, including Ursula von der Leyen and Antonio Costa, met in Beijing. The EU's top officials called for "real solutions" to move past an inflection point in relations with China. Costa emphasized the desire for "concrete progress on issues related to trade and the economy" between the EU and China.

Xi Jinping stated that in a turbulent world, it is important for China and the EU to strengthen communication, increase mutual trust, and deepen cooperation. However, the meeting was intended to be tense, with Brussels expecting the talks with Xi and Chinese Premier Li Qiang to be challenging. China's leadership has sought to draw the EU closer as it positions itself as a more reliable partner than the US.

Despite the challenges, a senior EU official stated the importance of having a direct, open, and constructive conversation with China at the highest level. Costa urged China to "use its influence" on Russia to help end Moscow's "war of aggression." China has rebuffed this claim and announced what were widely seen as retaliatory probes into imported European pork, brandy, and dairy products.

In summary, the EU and China remain at odds over trade imbalances, market access for European companies, Chinese industrial subsidies, and China’s stance on Russia. Both sides maintain firm positions but signal cautious willingness to engage on limited trade matters. The issues remain sensitive and unresolved at a substantive level.

1. The EU's policy-and-legislation regarding trade with China is focused on addressing the significant trade imbalance that has grown over the past decade, with the EU insisting on a more balanced trade relationship to ensure mutual benefit.
2. Businesses within the EU are frustrated with China's limited market openness and restrictive export controls, particularly with regards to critical materials like rare earths, and demand more transparency and freer access for their companies.
3. In the realm of general-news, the EU has criticized China's support of Russia amidst geopolitical tensions, and has urged China to use its influence to help end Russia's war of aggression. This relationship between China and Russia complicates EU-China relations and poses a significant point of divergence.

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