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The CCCEU Weekly Update 25 August 2023: EU's trade chief to visit China in September

CCCEU| Updated: Aug 25, 2023

Editor's Note: Greetings from a drizzly Brussels. This upcoming weekend, the U.S. Secretary of Commerce, Raymond, is poised to embark on a four-day visit to China. Her EU counterpart, Mr. Dombrovskis, is making preparations for his own China visit scheduled for next month, during which he will play a co-hosting role in a high-level dialogue. Amid ongoing debates in Brussels surrounding the perceived trade "imbalance" with China, the business community is urging the EU to recognize the complementary attributes inherent in the Sino-EU trade landscape. Enjoy your reading and have a nice weekend. 


Weekly updates:Focus

 U.S. Commerce Secretary Raymond is poised for a four-day sojourn to China this upcoming weekend. Following closely, European Commission Vice President and Trade Commissioner Dombrovskis is slated for his own visit to China next month. He will be co-chairing the eagerly anticipated high-level economic and trade dialogue between China and the EU. This momentous event marks the first in-person occurrence of the China-EU high-level economic and trade dialogue since the pandemic's onset.

According to officials from the European External Action Service, Dombrovskis is expected to address the issue of "trade imbalance" between the EU and China during his visit. The Director-General for Asia-Pacific at the Service, Gunnar Wiegan, stated to the media this week that over the past two years, trade between the EU and China has shown robust growth, but it is primarily due to a significant increase in China's exports to the EU. For instance, in 2022, the total trade volume between the EU and China was around 853 billion euros, with a trade deficit of 400 billion euros. "We have a very strong economic underpinning of this overall [EU-China] relationship, and the imbalances which exist have grown, and this needs to be addressed."

The notion of a "trade imbalance," often regarded as a longstanding concern from the European perspective, has been increasingly dubbed an "age-old matter". Nevertheless, analysts and professionals within the industry posit that evaluating this imbalance merely through the lens of a trade deficit oversimplifies the issue. In August of this year, the Chinese Ministry of Foreign Affairs spokesperson commented on the matter of trade imbalances in China-EU relations, asserting that China has never intentionally sought a trade surplus. Rather, the trade surplus between the two entities is an outcome molded by a complex interplay of factors encompassing industrial configuration, labor distribution, trade modalities, and external influences.

The industrial sector is pressing for recognition on the European front of the synergistic benefits that exist across domains like industries, supply chains, and consumer markets, bridging the gap between China and the EU.

From an industrial vantage point, China boasts robust manufacturing capabilities and is deeply involved in labor-intensive sectors, while Europe tends to excel in technology-intensive and high-value-added domains. With elevated energy and labor costs in Europe, the industrial compositions of both sides dovetail remarkably well.

Furthermore, the convergence of supply chains between the two entities generates a synergistic edge. China's manufacturing sector is intricately woven into the global value chain, functioning as a worldwide supplier across diverse sectors, which substantially bolsters the EU in areas such as design, development, and marketing. Amidst the backdrop of globalization, the amalgamation of supply chains and resources on both fronts fosters mutual gains in terms of cost-effective production and streamlined distribution.

Turning to the consumer market, China's expansive population and burgeoning middle-income bracket give rise to an immense consumer landscape. This landscape acts as a substantial "buyer" for high-end offerings and services from European enterprises. Particularly relevant during a period of inflationary pressures and sustained price hikes in Europe, China's manufacturing prowess maintains a steady advantage. These high-value-for-money products aid European consumers in grappling with inflationary forces.

To tackle the trade deficit conundrum, a swift and effective strategy lies in the European camp—unshackling export constraints on trade with China would offer a promising route to prompt outcomes.

Consider, for instance, a perusal of the leading 20 commodities along with their assessed worth in the realm of China-EU imports and exports for the year 2022. Notably, the exchange of high-tech merchandise such as automobiles, semiconductors, and electronic gadgets demonstrated a robust display. Delving into sectors such as electronics and semiconductors further, insights from the EU's statistical authority unveil a narrative. In the past year, the European Union procured goods with an estimated value of 32 billion euros from China. Notably, in parallel, exports from the EU surged, adding an impressive 13 billion euros to the tally.

Amid China's robust appetite for European "semiconductors," a noteworthy barrier looms on the horizon this year. The Netherlands' imposition of export restrictions on photolithography machines bound for China is anticipated to cast a shadow on the expansion of the EU's exports of high-tech goods to China.

This juncture prompts a contemplation of the paradox at play: while limitations on sales are enforced, simultaneous lamentations arise concerning China's perceived lack of procurement. As the landscape evolves, reconciling these double standards becomes a pressing necessity.


Weekly updates: Hot Topics

BRICS welcomes six new members

Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates were invited on Thursday to join the BRICS group of developing nations, which seeks to increase its global influence through the first expansion in over a decade. Reuter has more. 


Beijing calls for strengthened cooperation with Hungary

China's top legislator Zhao Leji met with Márta Mátrai, deputy of the speaker of the Hungarian National Assembly, on Tuesday in Beijing. Zhao, chairman of the National People's Congress (NPC) Standing Committee, said that bilateral relations have maintained healthy and stable growth since the two countries established diplomatic ties 74 years ago. Li Hongzhong, vice-chairman of the NPC Standing Committee, held talks with Mátrai on the same day. Read Xinhua's report here. 


China, Denmark release green joint work programme

Building on the Strategic Partnership, China and Denmark launched on August 18 a Green Joint Work Programme for 2023-2026. A former work programme lasted from 2017-2020. 


China bans seafood from Japan after wastewater release

China announced Thursday it was banning all seafood from Japan in response to Tokyo's decision to begin releasing treated radioactive waste water from the Fukushima nuclear plant, dramatically escalating an already tense feud between the two neighbours. CNN has the story. 


Stellantis explores tie-up with Chinese EV maker Leapmotor

Italian carmaker Stellantis is exploring options to partner with Chinese electric vehicle (EV) maker Zhejiang Leapmotor as it tries to expand its presence in the world's largest auto market, Bloomberg News reported on Wednesday. Considerations for a tie-up are ongoing and no final decisions have been made, the report said, citing people familiar with the matter. Global carmakers, including Germany's Volkswagen, have also expressed interest in a potential tie-up with Leapmotor, the report added. 


Commission approves two joint ventures by Benteler and BHAP

On Thursday, the European Commission approved, under the EU Merger Regulation, the creation of two joint ventures by Benteler Automotive Investment Limited ('Benteler') and Beijing Hainachuan Automotive Parts Co., Ltd ('BHAP'), both of China.
The Commission said that the newly created joint ventures will be active in the assembly and sale of chassis modules to automotive customers in China. "The Commission concluded that the proposed transaction would raise no competition concerns, given that the joint ventures have no foreseen activities in the European Economic Area," it noted. 


Weekly Update What are experts talking about?

"Adjustments in the United States' Strategic Positioning towards Europe and Policy Assessment"
Source: Institute of American Studies, Chinese Academy of Social Sciences
Author: Zhang Yifei

(Deputy Researcher, Institute of American Studies, Chinese Academy of Social Sciences) 

This article delves into the concept of strategic positioning, a notion central to a nation's sovereignty and reflecting its perception of its status and role in global power dynamics. Post-Cold War, the United States' stance within Europe's alliances oscillated between being a "subordinate" and a "partner". The historical backdrop and present reality underline that how the United States positions itself strategically towards Europe and its subsequent adaptations hinge on its ability to diminish or exert control over Europe. This calculus is intricately woven with various factors: the United States' superior hard power relative to Europe, the scope of Russia's sway in shaping the Western geopolitical landscape, the dynamics of European unity and divisions, and China's trajectory of growth.
Against the backdrop of the Russia-Ukraine conflict and the consequential strain on Russia-Europe relations, the United States seems inclined to position Europe as a managed subordinate. In the subsequent phase, there's a possibility of the U.S. formulating and executing policies geared towards solidifying its advantages, curbing Russia's influence over Europe, fortifying NATO, and fostering a united European front against China. The long-term ramifications of these policies are multifaceted: the bedrock of U.S. hegemony might face challenges; prominent European powers might intensify their drive for strategic autonomy; Russia and China could persist in their non-aligned strategic stances; and the trajectory of global development and cooperation might decelerate or even backtrack. 

 The BRICS summit and Europe's China challenge: A better EU offer for the global south

Source: European Council on Foreign Relations
Author: Mats Engström
(Senior Policy Fellow of European Council on Foreign Relations) 

'We want to export finished products, not rock and sand.' That was a key message from the South African president at this week's BRICS summit. Cyril Ramaphosa noted the importance of raw materials such as lithium, cobalt, and nickel – and argued their processing should take place in Africa. Developing countries are increasingly determined to move up global value chains. To this end, many leaders are looking to diversify their relationships and thereby reduce their dependence on the West.
Europeans were late in responding to Beijing's Belt and Road infrastructure initiative. The European Union's response – Global Gateway – still lacks strategic planning and sufficient resources. Other EU measures, like the carbon border adjustment mechanism, are also creating tensions, as evident in the Brazilian president's attack on "green neo-colonialism" at the summit. For Brazil, India, and South Africa, BRICS cooperation is not about taking China's side in a geopolitical struggle, but about progressing their own economic development under fair conditions. The same goes for potential new members such as Indonesia. By pursuing genuine joint development with the global south, Europe can remain relevant in the emerging global order.