Welcome back to What’s Happening in China, your weekly China brief.
Before EU trade commissioner Maroš Šefčovič flew to Beijing this week for a final round of talks with Chinese Commerce Minister Wang Wentao, German Chancellor Friedrich Merz and French President Emmanuel Macron sent a joint letter to the European Commission pushing for tougher EU action to address unfair trade practices:
“We welcome your work for strengthening our resilience, our competitiveness, and our ambitious and balanced EU trade agenda. And we hail your commitment to make use of the full range of trade measures in our hands. From dialogue with our trading partners toa more systematic and swifter use of the trade defence toolbox.
But this does not suffice any more. In parallel, and without delaying the full use of the existing set of instruments, we need a comprehensive framework to complement our toolbox with new legal instruments - in a lean and non-bureaucratic way.”
— Friedrich Merz, German Chancellor, and Emmanuel Macron, French President
The EU has been trying to address Chinese overcapacity and its growing trade deficit with China, which has reached €1 billion ($1.12 billion) a day. European officials have warned that the imbalance is putting pressure on EU manufacturing and contributing to job losses. There now seems to be a growing consensus on the need for a more coherent China policy.
China’s commerce ministry, in response, accused the two leaders of “encouraging the EU to resort to protectionist tools at every turn,” calling for “less politicizing economic and trade issues or overstretching the concept of national security” and to “avoid taking the wrong path in the wrong way and ultimately hurting themselves.”
At the end of the two-day meeting in Beijing, the EU and China announced an agreement aimed at limiting imports of Chinese hybrid cars into the EU, alongside improved access to the Chinese market for certain European products. Šefčovič also said the two sides had “reached a shared understanding to further facilitate China’s export licensing for rare earths and permanent magnets.”
EU leaders will now discuss relations with China and the outcome of the negotiations at the upcoming European Council summit on October 15–16.
Let’s jump into it.
— PC
Through the Lens
In Focus
I. EU-China: It’s a deal. For now.
The EU said it has reached a landmark deal with China to “halve” its sales of hybrid cars in the bloc amid fears surging sales could kill off parts of the European car industry.
Trade commissioner Maroš Šefčovič said the deal was the first of its kind and the result of “intense” negotiations with China since June to curb a trade deficit of €1.18bn (£1bn) a day, which has caused mounting tensions between the two economic powers.
The deal “opens the prospect of cutting China’s export [of hybrids] by more than a half”, Šefčovič said, adding that this would translate into a reduction in exports of plug-in and battery-powered hybrid cars by “several millions” over the next four years, said Šefčovič said Šefčovič at a press conference in Beijing on Friday.
“It is the first time that China has accepted to moderate its exports without going through the phase of prior trade tension,” he said, a reference to the usual investigations that must take place before safeguards under WTO trading rules are put in place.
China has been flooding Europe with cars, including hybrids and pure battery electric vehicles (BEVs), threatening European manufacturers. Hybrids combine an internal combustion engine with a small battery. They are sold by carmakers as a transitional step towards BEVs.
Read: China agrees to ‘halve’ hybrid car exports to EU in landmark deal | Automotive industry (The Guardian)
Related:
Merz and Macron want the EU to hit back harder — and faster — against trade threats (Politico)
EU toughens China stance ahead of Šefčovič’s Beijing visit (Politico)
EU ‘pulling out all stops’ with minerals projects as it tries to avert China trade war (The Guardian)
European industry groups call for urgent EU action on China trade (Reuters)
China’s ‘Self-Reliance’ Drive Is Upending Trade With Europe (The New York Times)
