China, EU head for a trade war
China and the European Union are heading for a trade war, as the EU trade deficit reaches record levels and Brussels despairs of Beijing taking measures to correct it.
In the first nine months of this year, China’s exports to the EU reached US$384.6 billion, an increase of 0.9 per cent. In all 2023, the trade deficit was US$292 billion, the second highest on record after US$396 billion in 2022.
Last week Jens Eskelung, chairman of the EU Chamber of Commerce in China, said in Brussels that a full-blown trade war looked more and more likely if nothing changed. “It is inevitable on the current direction of travel – a decline in Chinese imports and an accelerating increase in volume terms of Chinese exports,” he said. “This is propelled by deflation and results from the externalization of low domestic demand in China.”
He said that, since 2017, the Chinese economy had grown by 40 per cent but European exports to China declined by 30 per cent. There was a glut in Chinese production of EVs, batteries and solar panels, wind turbines, steel, legacy chips and other products, he said.
Beijing denies that it has over-capacity. It says that the surge in exports is a result of products of high quality and competitive prices that have helped Europe in its green transition. It is also the fault of European companies for being slow in research and not developing such products themselves, it says.
The first salvoes in the trade war have been the EU decision to impose duties on imports of Chinese electric vehicles as from October 31. In response, Chinese will impose tariffs of up to 39 per cent on imports of EU brandy. It is also considering tariffs on EU dairy and pork products and large-engine, petrol-powered vehicles.
In a speech in March 2023, EU Commission President Ursula Von der Leyen described China as a nation “more repressive at home and more assertive abroad," bent on achieving a "systematic change of the international order" with Beijing at its centre. She said that unfair trade practices, such as massive injections of industrial subsidies to conquer market share and control nascent technology, were another tool to ensure the Communist Party succeeded in its long-term mission.
Speaking in the European Parliament last week, Von der Leyen attacked Hungarian Prime Minister Viktor Orban. “Hungary is endangering European security by strengthening ties with Russia and China and allowing Chinese police to operate within its borders,” she said.
In its position paper published in September, the EU Chamber of Commerce in China said that the business confidence of its members was at an all-time low. It detailed the challenges faced by European companies operating in China and provided more than 1,000 constructive recommendations to Beijing on how they could be resolved.
“For a growing number of companies, a tipping point has been reached, with investors now scrutinising their China operations more closely as the challenges of doing business are beginning to outweigh the returns,” said Eskelund. “While China still holds significant potential, this situation urgently requires more action from the Chinese Government, not more action plans.”
China’s Ministry of Commerce said last month that, in the first eight months of this year, Foreign Direct Investment fell by 31.5 per cent from the same period in 2023 to 580.2 billion yuan.
China’s image in Europe will deteriorate further next week when President Xi Jinping goes to Kazan in Russia to meet Vladimir Putin. U.S. officials say that China is directly helping Russia’s war effort through exports of semi-conductors, machine tools and other parts and components needed by its arms factories.
Images of President Xi smiling and shaking hands with the man European governments and people regard as the second Adolf Hitler worsen China’s reputation in Europe.
Taking advantage of this, Tsai Ing-wen, former President of Taiwan, is visiting Europe and being received by senior politicians, including Petr Pavel, President of the Czech Republic. He is one of the strongest supporters of Ukraine.
The two shook hands and attended the Forum 2000 conference in Prague. In his speech to the event, Pavel called on China to use its influence to help end the war in Ukraine, to respect human rights and also show restraint in the Taiwan Strait.
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