Yan Shaohua is an associate professor and deputy director of the Centre for China-Europe Relations at Fudan University.
The economic and trade relationship between China and the European Union has long served as a cornerstone of their bilateral partnership. As bilateral trade approaches a historic US$800 billion, this interdependence remains a pillar of global stability despite shifting geopolitical winds.
However, the discourse surrounding trade imbalances between the two has become a flashpoint for tension, with reports indicating a goods trade deficit exceeding €300 billion (US$352.6 billion). While French President Emmanuel Macron and other European leaders have called for an urgent rebalancing of China-EU relations, a constructive path forward requires them to move beyond political rhetoric and address the structural realities of global trade with macroeconomic realism.
From a Chinese perspective, the EU’s concerns regarding industrial resilience and the sustainability of its domestic market merit high-level dialogue. Mechanisms such as the EU-China High-Level Economic and Trade Dialogue are essential for addressing mutual concerns. Even so, Europe must not overhype these figures.
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A singular focus on the deficit in goods trade can trigger protective instincts that lead to trade defence tools. Protectionism ultimately harms European consumers and disrupts global supply chains. Trade imbalances are often a symptom of global value chain dynamics rather than unfair practices. Politicising this issue only serves to fragment an already fragile global economy without solving the underlying economic drivers.
To find a sustainable solution, we must first clear the fog of several persistent misperceptions. First, the narrative of “industrial overcapacity” is used to attack China’s manufacturing efficiency. In a globalised world, production is rarely intended solely for domestic consumption. Just as European luxury cars are produced for the global market, China’s green technology – driven by intense internal competition and a mature industrial ecosystem – is produced to meet the urgent global demand for the energy transition.
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Why the EU, US are concerned about China’s overcapacity
Why the EU, US are concerned about China’s overcapacity
Furthermore, the deficit is not a zero-sum loss for Europe. As a common saying goes, the surplus is in China, but the profit is in Europe. When a German carmaker produces an electric vehicle in Shanghai and exports it to Hamburg, the deficit recorded in customs statistics obscures the fact that brand premiums, patent fees and dividends flow back to European headquarters.
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