Editor's Note: On Tuesday, China and the EU launched the first discussion under a new system that aims to streamline cross-border data flows. Meanwhile, European media have closely followed China's anti-dumping investigation into EU brandy, noting China's recent announcement that it would not take provisional measures for now. Amid these developments, Spanish Prime Minister Pedro Sanchez is set to visit China between September 7 and 12. Dive into this edition of the CCCEU Weekly Update for the latest insights on China-EU dynamics. Enjoy reading and have a fantastic weekend!

Focus

On Thursday, the Chinese Ministry of Commerce announced the preliminary findings of its anti-dumping investigation into EU brandy imports. According to the announcement, the investigation preliminary determined that imported brandy from the EU is being dumped, posing a substantial threat to China's domestic brandy industry. The preliminary determination found dumping margins between 30.6% and 39.0%.

However, the ministry also decided to put temporary measures on hold, leading to a surge in European brandy stock prices. The Chamber noted the following observations from European analysts:

First, some analysts believe China's decision not to take "provisional measures" on EU brandy may be linked to the EU's decision not to impose retrospective tariffs on Chinese electric vehicles (EVs) and commitments from high-level meetings.

France, the largest supplier of brandy imported by China, is widely viewed as an advocate of anti-subsidy tariffs on Chinese EVs. Reuters reported that China is a crucial market for French brandy producers, second only to the United States. Major brands such as Pernod Ricard, Hennessy's LVMH, and Rémy Cointreau have significant investments in China.

Against the backdrop of trade friction, European observers see China's investigation into European brandy as a "response" to the EU's probe into Chinese EVs. European media suggest that Beijing decided to hold off on its actions because the EU had chosen not to impose retrospective tariffs on Chinese-made electric vehicles (EVs), as stated in its recent preliminary conclusion. Furthermore, the Chinese leader had reportedly promised during his visit to Paris in May that China would not impose any tariffs until the investigation concludes in January 2025.

Second, the European Commission and the European spirits industry insist that exports to China comply with WTO rules.

Citi analysts warned that if tariffs are eventually imposed, European spirits' retail prices in China could rise by 20%, sales might fall by 16%, and earnings per share for these companies would be impacted.

In response to the case, EU Commission spokesperson Olof Gill said, "We remain fully confident that our cognac exports to China are completely in line with all applicable WTO rules.

Third, are the investigations on "separate tracks"?

According to Reuters, when asked whether the brandy investigation would affect the EU's EV tariff decisions, an EU spokesperson stated that the developments would not influence the EV tariff decisions, describing the two investigations as "different tracks."

In contrast, the EU's investigation into Chinese EVs is creating "tremendous pressure" on the market: registrations of Chinese EVs in Europe have significantly declined. Data from Jato Dynamics and Dataforce show that in July, the number of Chinese car registrations in Europe fell sharply, with MG's registrations down 38% year-on-year and 60% from June. Overall, Chinese companies registered fewer than 14,000 EVs in Europe in July, down from over 23,000 in June and 9.7% lower than July 2023.

Fourth: is the escalation of trade friction overblown?

The European side is concerned that the ongoing investigations involving pork, dairy products, and perhaps large-volume vehicles may escalate the trade tension.

Following China's announcement of an anti-subsidy investigation into the EU's dairy products, local farmers expressed concern. According to the South China Morning Post, Irish Creamery Milk Suppliers Association (ICMSA) President Denis Drennan stated that they would urge the Irish government to vote against EV tariffs, saying, "We absolutely should be voting against it." He added, "Farmers are afraid, and this is only the start of it—it will notch up as things go along, and infant formula could be hit next."

Some European commentators, on the other hand, believe that China will champion WTO principles and refrain from escalating trade spats; there is a hope that the two sides may manage the trade frictions.

They noted that China's decision to delay provisional measures on brandy can be seen as a “tactical pause”—maintaining pressure on the EU while leaving room for negotiations. While the EU insists on its EV tariffs, it also faces internal pressure from various interest groups within its member states, particularly those industries highly dependent on exports to the Chinese market.

Hot Topics

Chinese President Xi meets with US National Security Advisor Jake Sullivan

Xinhua reported that Chinese President Xi Jinping met with U.S. National Security Advisor Jake Sullivan at the Great Hall of the People in Beijing on Thursday. Xi pointed out that in this changing and turbulent world, countries need solidarity and coordination, not division or confrontation.

Top Chinese diplomat meets German SPD delegation

According to Xinhua, Wang Yi, director of the Office of the Central Commission for Foreign Affairs, met with a German Social Democratic Party (SPD) delegation led by Rolf Mutzenich, chairman of the SPD of Germany parliamentary group in the German Bundestag, in Beijing on Tuesday.

Wang said, this year marks the 10th anniversary of the China-Germany comprehensive strategic partnership, expressing China's readiness to enhance party-to-party exchanges. Mutzenich emphasized SPD's willingness to continue cooperation and dialogue with China.

Spanish PM To Visit China Amid EU Trade Standoff

According to AFP, Spanish Prime Minister Pedro Sanchez will visit China between September 7 and 12, his office said Friday.

EU, China launch mechanism to facilitate industrial data flows

China and the EU launched the first discussions under a new system that aims to streamline cross-border data flows on Tuesday.

The mechanism aims to facilitate international transfers of non-personal data for European businesses while ensuring their compliance with Chinese data laws.

Dutch government to limit ASML export to China even further

Bloomberg reported that the Netherlands plans to limit ASML Holding NV's ability to repair and maintain its semiconductor equipment in China, a potentially painful blow to Beijing's efforts to develop a world-class chip industry.

China's international use of renminbi surges to record highs

The Financial Times reported that the yuan was used in 53% of transactions paid by China abroad or paid to China from abroad in July, according to data from China's National Exchange Administration. This is up from about 40% in the same month in 2021.

Push for gender equality stalls as men dominate nominations for EU Commission

According to RFI, with Friday's deadline approaching for EU members to offer nominees for von der Leyen's 26-person team, 16 of the 21 names known so far are men. After her re-election in July, the European Commission president had asked states specifically to give her a choice of one male and one female candidate.

China's BYD to use Huawei's advanced autonomous driving system in off-road EVs

According to Reuters, Chinese EV giant BYD, has signed an agreement with Huawei to use the Chinese tech conglomerate's advanced autonomous driving system in its off-road Fangchengbao EVs, Huawei said on Tuesday.

The Bao 8 SUV under the Fangchengbao lineup will be the first BYD model to sport Huawei's Qiankun intelligent driving system and go on sale later this year.

Euro-Zone Economic Confidence Inches Up on Industry, Services

Bloomberg reported that Euro-area economic confidence edged higher for a second month thanks to improvements in industry and services. A sentiment indicator published Thursday by the European Commission rose to 96.6 in August from a revised 96 the previous month

EU new car sales flat in July as battery-electric slumps: industry body ACEA

The Association of European Automobile Manufacturers (ACEA) said on Thursday that new car sales in the EU rose 0.2 percent in July, slowed by declines in France and Germany, while battery-electric vehicles continued to lose market share.

What are experts talking about?

Transatlantic Relations Enter a Challenging Period of Restructuring

Source: Institute of European Studies, Chinese Academy of Social Sciences

Author(s): Feng Zhongping

The transatlantic alliance was formed through NATO during the Cold War, but the cohesion between Europe and the United States has weakened following the dissolution of the Soviet Union and the end of the Cold War. Subsequently, a series of significant strategic shifts on both sides of the Atlantic, including the creation of the Euro at the turn of the century, the eastward expansion of the European Union, and the public opposition by core EU countries such as France and Germany to the U.S. invasion of Iraq, as well as the U.S. "pivot to Asia" under President Obama, all contributed to the loosening of transatlantic alliance interests.

In 2017, tensions between Europe and the U.S. were exacerbated when Donald Trump took office, plunging transatlantic relations to their lowest point since the end of World War II. After Joe Biden assumed the presidency in 2021, efforts were made to repair these relations significantly. Additionally, the NATO alliance was revitalized due to the abrupt escalation of the Ukraine crisis, leading to noticeable improvements in transatlantic relations. However, as the 2024 U.S. presidential election approaches, particularly with the potential return of Trump, transatlantic relations are likely to face new turbulence and challenging restructuring efforts.

World Economy in Summer 2024: Moderate growth while cycles converge

Source:  Kiel institution for the world economy

Author(s): Nils Sonnenberg; Jan Reents; Wan-Hsin Liu; Stefan Kooths; Klaus-Juergen.Gern

The global economy has expanded at a moderate pace so far this year. Meanwhile, the previously pronounced differences in economic momentum have diminished, particularly in the advanced economies. While the robust expansion in the United States lost momentum, the economy in Europe picked up noticeably after a period of stagnation. At the same time, production in China showed signs of improvement. Against this backdrop, growth in world trade in goods resumed. The moderate global economic expansion is likely to continue in the forecast period, with private consumption picking up in Europe as real wages rise again.

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.