EU trade chief warns of “new areas of concern” in China relationship

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European Union trade chief Valdis Dombrovskis has warned over “new areas of concern” in the bloc’s relationship with China, as part of a maiden visit that aims to confront “unbalanced” dealings between the two regions.

In an interview with the Financial Times in Shanghai, the EU vice-president cited “implications of the anti-espionage law” in China and “data flows” as concerns, alongside market access for foreign companies in the mainland.

“We want to maintain [a] trading relationship with China, it’s important, it’s our second-largest trading partner,” Dombrovskis said. “But we need to address certain aspects of this relationship.”

His four-day visit comes just a week after Brussels launched an investigation into Chinese subsidies on electric vehicles, as tensions rise over a record €396bn bilateral trade deficit.

Dombrovskis, who will hold talks with senior officials in Beijing including vice-premier He Lifeng, said his intention was to have “specific sector-by-sector discussions” regarding the deficit.

His comments follow complaints from foreign businesses about the operating environment in the mainland, where a tighter focus on national security includes restrictions on data flows and a broadly-worded anti-espionage law. 

The European Chamber of Commerce in China this week cited a “more politicised business environment” and “ambiguity in new or updated laws”, which it said had hit confidence.

Foreign companies are also under pressure to “de-risk” exposures to the mainland amid deteriorating US-China relations and heightened scrutiny of supply chains in Washington.

In a separate speech at the Bund Summit conference in Shanghai on Saturday morning, Dombrovskis said the EU “has no intention of decoupling” from China, but reiterated its de-risking approach.

He also emphasised a perceived imbalance in trade, saying the bloc “needs to protect itself in situations where its openness is abused” and that it was “necessary” to broaden access to China’s market for foreign companies.

Jorge Toledo, the EU’s ambassador to China, said this week in Beijing that the deficit was the “highest in the history of mankind”, while the European Chamber of Commerce unveiled over 1,000 recommendations for the Chinese government to resolve challenges facing its businesses.

Heightened geopolitical tensions and scrutiny of trade ties have come at a difficult time for the Chinese economy, which has struggled to rebound fully after three years of zero-Covid restrictions ended at the start of the year.

“China’s economic model continues to focus heavily on investment and export-oriented investment whereas the domestic demand side is lagging behind,” Dombrovskis told the FT, saying it was among the “factors” behind the trade deficit.

China has complained about the influence of Washington, especially following US-led semiconductor sanctions that have affected ASML of Holland, the world’s sole supplier of high-end lithography machines.

Wu Hongbo, Beijing’s special representative on European affairs, said recently that “it should be up to Europe and European countries what to sell to China”. Dombrovskis said the EU used the term “de-risking” before the US.