Editor's Note: Happy International Women's Day! China's "Two Sessions" have captured global interest. Meanwhile, amidst the Ukrainian crisis, Li Hui, China's Special Representative for Eurasian Affairs, is actively engaged in shuttle diplomacy. This week, European experts suggest that China is "de-risking" the EU, though it's important to remember that the EU had previously framed its strategy towards China as "de-risk but not de-couple." Stay informed on China-EU trade and bilateral ties with this edition of the CCCEU Weekly Update. Enjoy your read and have a restful weekend.

▶︎ Focus

Recent statistics published by Eurostat indicate that the EU's trade deficit with China shrank by 27% in 2023, from €397 billion in 2022 to €291 billion. This decrease was characterised by a 3% reduction in exports to €223 billion and an 18% decline in imports to €514 billion.

The media reported that some European experts argue that this shift does not signify the EU's successful de-risking from China. Instead, it supports Beijing's efforts towards achieving strategic independence from the West. They attribute the decline in the EU's exports to China mainly to China's adoption of import substitution and "home-shoring of strategic supply chains" to reduce its reliance on Western strategies.

This perspective, however, is arguably biased. The data speaks for itself, as shown in the graph, between 2022 and 2023, EU exports to China saw minimal fluctuation, peaking at €20.9 billion in February 2023 after hitting a low of €17.7 billion in April 2022. During this period, EU imports from China generally trended downward, from €48.9 billion in January 2022 to €39.6 billion in December 2023, contributing to the reduced trade deficit.

Additionally, the period saw a general decline in the EU's goods trade volume with non-EU countries, not just China. Imports from China decreased by 19.0%, compared to a 5.9% reduction in imports from other non-EU countries. The EU's adjustments in its supply chain and increased emphasis on sustainability and environmental standards have also lessened its dependency on Chinese imports. Measures such as the Carbon Border Adjustment Mechanism (CBAM) and the Circular Economy Action Plan (CEAP) have set higher environmental standards, indirectly affecting demand for certain Chinese products.

Moreover, the global economic slowdown's impact on Sino-European trade cannot be ignored. The United Nations' "World Economic Situation and Prospects 2024" report highlights substantial challenges to global growth, predicting a slowdown from 2.7% in 2023 to 2.4% in 2024, below the pre-pandemic growth rate of 3%. Although the EU's trade deficit with China results from market supply and demand rather than Chinese policy implementation, it has become a point of criticism against China. As stated by Chinese Foreign Ministry spokesperson Wang Wenbin, China does not deliberately pursue a trade surplus. Instead, China is actively promoting a high level of openness to the outside world, welcoming all countries to share in the benefits of its vast market.

The increasing restrictions on exports of high-tech and sensitive technology products by the EU contradict its intentions to boost exports to China, potentially harming the healthy and stable development of Sino-European economic and trade relations. Amidst rising anti-globalisation sentiments and geopolitical tensions, China is steadfastly expanding its openness to the outside world, implementing measures to facilitate foreign nationals' entry into China for business, study, and tourism, and revising its national negative list for foreign investment, among other initiatives.

In conclusion, as China celebrates the 75th anniversary of its founding and aims to achieve its "14th Five-Year Plan" goals, the emergence of new production capacities, clean energy, and digital economies offers fresh momentum for China's continuous and healthy economic development. With vast opportunities for cooperation in green energy, the digital economy, and technological innovation, the common interests between China and the EU far outweigh their differences. As Foreign Minister Wang Yi stated, the essence of Sino-European relations should be partnership, cooperation, autonomy, and mutual benefit, underscoring that as long as China and the EU engage in mutually beneficial cooperation, neither anti-globalisation forces nor bloc confrontations will prevail.

▶︎ Hot Topics

 >>EU aims to shift European arms industry to "war economy mode"

The European Commission reportedly proposed to boost the EU arms industry program, with the goal of turning the EU arms industry to a "war economy model" to deal with the crisis caused by the Russian-Ukrainian conflict.

Zhao Chen, director of European Studies at CAAS, analysed the surging news that the recent performance of Ukraine in the Russian-Ukrainian conflict, especially after the loss of the key town of Avdeyevka, has stimulated Europe relatively large, and compared with the United States, Europe's assistance to Ukraine has been very firm. The European military industry plans to turn to the "war economy" not only to continue to aid Ukraine but also to prepare for the second election of Trump, fearing that once Trump takes office to abandon Ukraine, Europe needs to face more military pressure.

 >>Sweden Formally Joins NATO

Sweden on Thursday formally joined NATO as the 32nd member of the transatlantic military alliance, ending decades of post-World War II neutrality and centuries of broader non-alignment with major powers as security concerns in Europe have spiked following Russia's 2022 invasion of Ukraine, AP reported.

 >>China to allow visa-free entry to citizens from 6 more European countries

The Chinese government on Thursday announced that Irish, Swiss, Hungarian, Austrian, Belgian and Luxembourgish citizens will be able to travel visa-free to China, Politico reported.

"I would like to inform you that starting from March 14, China will further implement the visa-free policy for Switzerland, Ireland, Hungary, Austria, Belgium and Luxembourg on a trial basis," Foreign Minister Wang Yi said at a press conference during the National People's Congress meeting in Beijing.

  >>China's foreign trade up 8.7% in Jan-Feb

China's total imports and exports of goods expanded 8.7 percent year on year in yuan terms in the first two months of 2024, official data showed Thursday, Xinhua News Agency reported.

From January to February, the country's foreign trade in goods stood at 6.61 trillion yuan (about 930.96 billion U.S. dollars), according to the General Administration of Customs (GAC).

The country's trade in goods with its third-largest trade partner, the United States, grew 3.7 percent to 707.7 billion yuan during the period, while that with the European Union, its second-largest trade partner, edged down 1.3 percent year on year.

  >>EU, China launch 3rd phase of dialogue on migration and mobility support project

On 29 February, in Beijing, the Delegation of the EU to China and the Ministry of Foreign Affairs of China co-hosted the launch ceremony of the third phase of the EU-China Dialogue on Migration and Mobility Support Project. Relevant Chinese authorities, EU Member States representatives and the Directorate General for Migration and Home Affairs of the European Commission attended the event.

  >>Chinese diplomat shuttling to Russia and Ukraine

This week, Chinese diplomat Li Hui, serving as the Special Representative for Eurasian Affairs, embarked on a diplomatic mission to Ukraine, Russia, and other European countries, aiming to foster consensus among diverse parties in preparation for potential peace negotiations.

▶︎ What are experts talking about？

How to integrate the "Four chains"? → Innovation chain + industrial chain + capital chain + Talent Chain

Source: Chinese Academy of Sciences

Author: NIE Changhong, ZHAO Feijie, LI Chuan, CHEN Tong

In June 2023, the EU released its first Economic Security Strategy, attracting widespread international attention. This article comprehensively and systematically reviews and analyses the strategy, including its background, policy framework, related shifts in EU economic policy concepts, its implementation prospects, and its impacts. Overall, under the combined effects of the COVID-19 pandemic, the full escalation of the Ukraine crisis, the rise of new industrial revolutions, and the US's strategic competition with China, the EU is currently deep in a state of risk and competitiveness anxiety. The introduction of the Economic Security Strategy marks a fundamental shift in the underlying logic of the EU's internal and external economic policies from "efficiency first" to "balancing efficiency and security," and in some areas, even "security first."

Ukraine's path to European Union membership and its long-term implications

Source: Bruegel

Author: Zsolt Darvas Marek Dabrowski Heather Grabbe Luca Léry Moffat André Sapir Georg Zachmann

Whether and when Ukraine accedes to the European Union will depend greatly on how and when its war with Russia ends and post-war reconstruction starts, and how the EU handles issues of governance, security, migration, trade, investment, the energy transition, decarbonisation and the EU budget.

The enlargement process is likely to overlap with post-war reconstruction, increasing the EU's influence in fostering Ukraine's institutional development. Ukrainian leaders will have strong incentives to comply with the accession criteria, which the EU should use astutely to create a better-functioning economy and public institutions, especially by reducing opportunities for corruption.

Please note: the English version of this issue is slightly different from our Chinese one. The views and opinions expressed in this article do not necessarily reflect the official position of the CCCEU.

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