European Commission President Ursula von der Leyen used the high‑profile EU‑China summit to underscore a growing sense of urgency: the European Union’s trade relationship with China must become more balanced. Speaking in Beijing, von der Leyen laid out a litany of concerns—from ballooning trade deficits and unfair subsidies to strategic dependencies and geopolitical tensions—that have convinced Brussels it can no longer pursue unfettered market access without safeguards. Her call for a “trade reset” reflects a broader shift in EU policy toward what officials term “de‑risking” partnerships that carry systemic economic or security risks.

Surging Deficits and Market Distortions

Over the first half of 2025, China ran a goods‑trade surplus of nearly €130 billion with the EU—an increase of more than 20 percent over the same period last year. This imbalance stems in part from China’s state‑backed industrial overcapacity, which has flooded European markets with cheap solar panels, steel, aluminum and machinery. For many EU producers, competing against suppliers who benefit from generous subsidies and low‑cost capital has become unsustainable. In response, Brussels imposed safeguard measures on Chinese solar imports in 2013, yet the underlying market dynamics persist as China shifts exports to other upstream components.

Meanwhile, the EU’s much‑touted “level playing field” has been repeatedly undermined by China’s domestic policies. European firms complain of forced technology transfers, onerous joint‑venture requirements and restricted access to China’s fast‑growing services and digital markets. Anti‑dumping and anti‑subsidy investigations into Chinese electric vehicles, pharmaceuticals and chemical products have proliferated, resulting in provisional duties on many goods. Yet those measures alone have not stemmed the tide of low‑priced imports, nor have they addressed the structural asymmetries in investment screening and public procurement tenders.

Strategic Dependencies and Geopolitical Risks

Von der Leyen’s remarks also highlighted deeper strategic anxieties. Europe’s reliance on China for critical raw materials—such as rare earths, lithium and cobalt—has emerged as a vulnerability in both the green‑energy transition and defense supply chains. When Beijing temporarily restricted rare‑earth exports in 2024, European carmakers and electronics manufacturers were forced to halt production lines. Although China later eased those curbs, the episode underscored how a trading partner can weaponize key commodities.

Moreover, Brussels has grown increasingly uneasy over China’s role in enabling Russia’s war economy. Despite international sanctions, Russian firms have managed to reroute goods through Chinese ports and logistics networks. Von der Leyen pointed to fresh evidence that some Chinese‑built dual‑use technologies and drone components were finding their way into Russian military systems—an outcome at odds with Europe’s strategic interests. This covert support has reinforced the EU’s conviction that its China policy must factor in geopolitical as well as economic balances.

A related concern is over digital infrastructure. Huawei’s dominance in 5G equipment and Chinese advances in AI have raised fears of espionage and undue political influence. Several member states have imposed restrictions on certain vendors, and the Commission is considering new rules to vet foreign technology suppliers for security risks. For Brussels, safeguarding data, networks and critical infrastructure is now inseparable from broader trade negotiations.

Policy Responses and the Road Ahead

Faced with these challenges, the European Commission is recalibrating its toolkit. On the defensive side, Brussels has strengthened its trade‑defense instruments, making it easier to launch investigations and impose provisional duties against unfair dumping or subsidized imports. In parallel, new anti‑coercion rules allow the EU to retaliate against third‑country measures that threaten European interests.

On the offensive side, the EU is pressing China for greater reciprocity. Efforts are underway to secure real‑market access for European financial services, automotive and luxury‑goods firms—sectors where China imposes high entry barriers. Negotiators are also exploring “balanced mutual recognition” of standards in green technologies, aiming to reduce compliance costs and avoid fragmented market rules.

Finally, Brussels is accelerating its de‑risking agenda. Through the Critical Raw Materials Act and Chips Act, the EU aims to diversify supply chains for batteries, semiconductors and other strategic goods, offering state aid and R\&D incentives for local production. Partnerships with like‑minded democracies—such as the US, Japan and South Korea—are being deepened to create alternative sources for essential inputs. This collective approach seeks to blunt China’s leverage while sustaining open trade with all partners.

Von der Leyen framed these shifts not as a break with China, but as a necessary adaptation to ensure a durable, fair and mutually beneficial relationship. “We stand at an inflection point,” she declared. “To preserve the gains of open markets, we must correct the imbalances and bring our partnership on a sustainable footing.” As the EU readies its next trade and investment strategy, the tone set in Beijing makes clear that balance—economically, strategically and geopolitically—has become the watchword for Europe’s engagement with its largest Asian partner.

(Adapted from EuroNews.com)

Categories: Economy & Finance, Geopolitics, Regulations & Legal, Strategy, Sustainability