Future China-EU economic relations are likely to be defined by cooperation amid ongoing competition. Europe will need to choose when to emphasize industrial competitiveness and when to protect open markets. China should respond more proactively to European concerns over industrial development, employment and economic security.
Relations between China and the European Union are currently undergoing a period of profound adjustment. At the 25th China-EU Summit last year, the two sides expressed their shared commitment to advancing bilateral relations on the basis of mutual respect, openness, cooperation, proper management of differences, and defense of multilateralism.
China has repeatedly emphasized that its relationship with the European Union should be defined by partnership rather than rivalry, with cooperation serving as both the defining feature and the stabilizing anchor of bilateral ties. At the same time, however, disputes over electric vehicles, critical minerals, industrial subsidies, market access and industrial competition continue to test the resilience of bilateral economic and trade relations.
Assessing the current state of China-EU economic and trade relations is not simply a matter of labeling them as good or bad. The key is to understand how their underlying structure is evolving. The fundamental foundation of cooperation remains intact, and the two sides have long ranked among each other’s most important trading partners.
According to Chinese reports, two-way trade in goods reached $828.1 billion last year, up 5.4 percent year-on-year, while two-way investment exceeded $280 billion. Yet the conditions for cooperation, the nature of competition and the boundaries of economic risk have all undergone profound change. Bilateral economic relations are no longer primarily defined by traditional complementarity; they are increasingly characterized by what may be called “competitive complementarity.” The critical challenge is not to deny the existence of competition but to prevent it from becoming a political or security instrument or subsumed into bloc-based confrontation.
It is precisely for this reason that the frequently cited notion of China-EU economic imbalances calls for a calm, comprehensive assessment instead of a simplistic attribution of responsibility to China. In recent years, Brussels has stepped up its policy pressure on its trade deficit with China, imports of Chinese green products and competition with European industries. It has tended to interpret these structural challenges through the lens of alleged Chinese “overcapacity” and “market-distorting subsidies.” Such diagnoses fail to reflect the full picture.
As Chinese leaders have pointed out, the challenges currently confronting Europe do not originate in China. The trade imbalance has never been the product of a single country, a single policy or a single industry. Rather, it is a transitional phenomenon shaped by the combined effects of market-driven business decisions, structural strains within the European economy, the spillover effects of the Russia-Ukraine conflict, policy shifts in the United States and Europe’s own evolving pursuit of greater strategic autonomy.
First, the current structure of China-EU trade is, to a large extent, the result of market-driven decisions made by businesses on the basis of cost, efficiency, market demand and supply chain security. Respecting the autonomy of businesses and fostering a fair and open business environment have long been principles that Europe itself has championed.
Chinese exports of electric vehicles, solar products, batteries, machinery and consumer goods to Europe are not the product of administrative directives or unilateral industrial policy. Rather, they reflect commercial activity driven by genuine market demand in Europe, companies’ comparative advantages and the global division of labor. European consumers and businesses choose Chinese products because they offer a competitive combination of price, quality, delivery reliability and after-sales support.
This competitiveness cannot simply be attributed to government subsidies. Instead, it is the product of fierce competition within China’s vast domestic market, supported by the country’s comprehensive and highly efficient industrial ecosystem and years of technological upgrading and innovation by Chinese companies.
At the same time, China has continued to expand opening-up, welcoming not only deeper engagement by European businesses in the Chinese market but also more European exports to China. Over the years, European companies in sectors such as automobiles, chemicals, pharmaceuticals, high-end manufacturing, luxury goods and agrifood have benefited enormously from China’s vast consumer market. Any assessment of China-EU economic and trade relations should therefore look beyond Europe's short-term goods trade deficit. It should take into account the returns generated by European investment in China, earnings from trade in services, brand premiums and the gains European firms derive from their positions in global value chains.
Moreover, in the context of deeply integrated global production and supply chains, a considerable share of the output produced by European-invested enterprises in China is ultimately exported back to Europe. Given differences in the statistical methodologies used by China and the European Union, this means that customs data alone cannot provide a comprehensive measure of so-called trade imbalances. Reducing a trade pattern shaped by market forces to a political issue only obscures the real sources of imbalance.
Second, Europe's current economic difficulties are closely linked to the prolonged Russia-Ukraine conflict and to policy choices made within Europe itself. The continent’s structural challenges cannot simply be attributed to a distant third party. Since the outbreak of the war, Europe has faced sustained pressure on its energy system, industrial base, public finances and corporate competitiveness. The disruption of long-established supplies of affordable and reliable energy has significantly increased production costs for energy-intensive industries—including chemicals, steel, automobiles and advanced manufacturing—in major manufacturing economies such as Germany.
At the same time, governments have been compelled to devote a growing share of fiscal resources to security and defense, leaving less room for long-term investment and industrial modernization. Coupled with persistently high energy prices, elevated interest rates, and mounting regulatory costs, these developments have placed European businesses under increasing operational and competitive strain.
More fundamentally, prolonged geopolitical crises are reshaping the operating environment of the European economy. Divergent burdens arising from sanctions on Russia have made policy coordination within Europe increasingly difficult. At the same time, growing reliance on trade protectionism and industrial subsidies has deepened fragmentation within the single market, while the persistence of security risks has further eroded investor confidence in the long-term prospects of European manufacturing. As a result, parts of Europe’s core industries and investment have increasingly shifted abroad, leading to a sustained drain on fixed-asset investment.
Meanwhile, Europe’s external economic policies have become progressively more restrictive amid growing efforts to impose security implications. Established supply chains are being artificially fragmented, forcing businesses into bloc-based arrangements that entail higher costs and lower efficiency, while narrowing Europe’s strategic flexibility in global trade.
Against this backdrop, the relative decline in the competitiveness of certain European industries cannot simply be attributed to rising Chinese exports. It is also closely linked to Europe’s own policy choices in the areas of security, energy, industrial development and fiscal governance.
Third, Europe's assessment of its economic and trade relationship with China has increasingly been shaped by U.S. strategic narratives, while insufficient strategic autonomy has amplified the risk of misjudgment. In recent years, Washington has increasingly framed issues such as trade imbalances, industrial competition, critical supply chains, and technological leadership through the lens of national security. It has also promoted concepts such as “overcapacity,” “de-risking” and “supply chain security” in an effort to build a coordinated approach with its allies toward China.
Europe’s efforts to safeguard its industrial interests and strengthen supply chain resilience are both understandable and legitimate. However, if it relies too heavily on another country’s strategic framing, issues that could otherwise be addressed through bilateral dialogue on trade, investment and regulatory rules between China and the European Union risk being subsumed into the broader framework of great-power competition.
It should be made clear that China-EU relations are neither directed against, dependent on, nor constrained by any third party. China has consistently supported European integration and the European Union’s pursuit of strategic autonomy, and it welcomes Europe playing an independent role in an increasingly multipolar world. Allowing U.S. strategic narratives to exert undue influence over Europe’s economic assessment of China would ultimately do little to advance Europe’s own strategic autonomy.
In fact, Europe is far from lacking voices that advocate a more balanced perspective. In recent debates over global economic imbalances, a number of European policymakers, economists and scholars have argued that global rebalancing should be pursued through dialogue and cooperation rather than through simplistic calls for decoupling. Adopting a broader global perspective, they contend that today’s imbalances are the product of a complex interplay of factors, including the consumption and investment patterns of major economies, differing industrial policy orientations and the ongoing reconfiguration of global supply chains, rather than the result of China’s actions alone.
Amid the profound changes unseen in a century, China remains committed to resolving differences through dialogue with utmost sincerity,while firmly safeguarding its industrial and trade interests. It has consistently emphasized that the essence of China-EU economic and trade relations lies in complementarity, mutually beneficial and win-win cooperation, and that a more balanced relationship should—and can—be achieved through continued development.
The so-called imbalance in China-EU economic and trade relations should not be reduced to simplistic claims that “China exports too much” or that “China is undermining Europe's industries.” The way forward lies not in mutual recriminations or the erection of ever higher trade barriers but in addressing trade balances, industrial competition, investment cooperation and regulatory coordination on their own merits. This requires rebuilding dialogue on the basis of facts, seeking equilibrium through market principles and sustaining cooperation on the foundation of strategic autonomy.
The first priority is to return economic and trade issues to the economic and trade domain, preventing commercial frictions from becoming politicized or evolving into bloc-based confrontation. There is no fundamental geopolitical conflict between China and Europe. The basic reality remains unchanged: Cooperation outweighs competition, and common interests far exceed differences.
China possesses a complete industrial system, a vast domestic market, strong manufacturing capabilities and rapidly advancing green technologies. Europe has built enduring strengths in high-end equipment manufacturing, automotive engineering, basic scientific research, pharmaceuticals, environmental standards, financial services and globally recognized brands. The steady expansion of China-EU economic cooperation over recent decades has been driven precisely by the strong complementarity of their industrial structures, markets and technological capabilities.
To be sure, differences over trade balances, industrial competition and supply chain dependencies do exist. Yet these remain, in essence, economic and commercial issues. They should therefore be addressed primarily through rules-based mechanisms, objective evidence and constructive negotiations, rather than being magnified by political narratives or public mobilization. Cases involving alleged dumping or unlawful subsidies should be handled strictly in accordance with the rules of the World Trade Organization and the domestic legal procedures of the respective parties. Pressures arising from industrial cycles, energy prices or shifts in market demand should be gradually absorbed through industrial cooperation, market adjustment and forward-looking investment. Only by clearly defining the issues, accurately assigning responsibility and applying appropriate policy instruments can both sides prevent trade frictions from escalating into broader institutional rivalry or strategic confrontation.
Second, trade frictions should be transformed into opportunities for investment cooperation, shifting China-EU economic ties from a transactional relationship to one of joint value creation. While Europe has expressed concerns about the growth of Chinese exports, it also has a practical interest in attracting Chinese companies to invest, create jobs, establish research and development centers and to support its green transition. At the same time, the internationalization of Chinese enterprises is evolving beyond an export-driven model toward an integrated strategy that combines trade, investment, research and development and after-sales services.
Against this backdrop, China and Europe can deepen localized cooperation in areas such as new-energy vehicles, charging infrastructure, battery recycling, green steel, hydrogen energy, smart grids, healthcare, pharmaceuticals and advanced manufacturing. Such cooperation would not only help alleviate European concerns over import competition and industrial hollowing-out but also enable Chinese companies to become more deeply embedded in Europe's regulatory framework, industrial ecosystem and broader business environment, thereby reducing the political sensitivity surrounding trade disputes.
Concerns over dependence on critical supply chains could likewise be addressed through longer-term supply agreements, localized production, joint research and development, cooperation in third-country markets and transparent export management. As China-EU economic relations increasingly evolve toward a model of competitive complementarity, it becomes all the more important to strengthen shared interests through investment and practical cooperation, rather than allowing recurring trade disputes to erode the trust that underpins the broader relationship.
Third, differences over rules should be brought into institutionalized dialogue, rather than allowing unilateral instruments to supplant multilateral rules. Europe’s principal concerns include market access, government procurement, cross-border data flows, intellectual property protection and subsidy transparency. China’s concerns center on the expanding use of the EU’s trade defense instruments, discriminatory investment screening, the increasing use of green regulations as trade barriers and the widening scope of export restrictions targeting China. Addressing these issues requires more concrete, pragmatic and institutionalized dialogue.
China can continue to expand high-standard opening up, improve the business environment for foreign investment, enhance policy transparency, and import more high-quality European products that meet the needs of the domestic market. Europe, in turn, should move beyond label-driven narratives such as Chinese overcapacity and trade imbalance, relax unjustified restrictions on exports of high-technology products and ensure that the principle of fair competition is not used as a pretext for protectionism. Dialogue on rules must go beyond broad statements of principle and translate into tangible improvements that businesses can perceive in market access, regulatory enforcement and policy predictability.
Recent interactions have demonstrated that constructive engagement can produce practical results. The continued dialogue between China and the European Union on issues such as electric vehicle pricing and export controls illustrates that once both sides return to the negotiating table, even complex disagreements can be effectively managed and gradually defused.
Beyond improving mutual understanding at the bilateral level, the two sides should work together as stabilizing forces within the multilateral system. With the 14th WTO Ministerial Conference having concluded and preparations for APEC China 2026 well underway, they continue to share broad opportunities for cooperation in areas including WTO reform, climate governance, green finance, digital trade, debt issues facing developing countries and the resilience of global industrial and supply chains.
Differences are an objective reality, but they should not obscure the broader common interests that they share in upholding multilateral rules, opposing unilateral coercive practices and safeguarding the stability of global supply chains.
Overall, the future of China-EU economic relations is likely to be characterized by cooperation amid competition, and by openness with clearly defined boundaries. China’s proposals for the future development of the bilateral relationship—upholding mutual respect and consolidating the partnership, pursuing openness and cooperation while properly managing differences and frictions and practicing multilateralism while safeguarding the international rules-based order—provide a clear direction for this relationship.
Achieving these objectives will require a higher degree of policy maturity from both sides. Europe needs to distinguish between strengthening its industrial competitiveness and preserving an open market, rather than externalizing its own structural challenges. China should continue to stabilize exports while responding more proactively to Europe’s concerns over industrial development, employment and economic security by enhancing investment cooperation, deepening regulatory dialogue and strengthening its capacity for localized operations.
There is every reason to believe that, as long as both sides remain committed to strategic communication, rules-based consultation and a balanced approach to mutual interests, China-EU economic relations will be able to preserve their resilience amid friction and safeguard the foundations of cooperation even in an increasingly competitive environment.
