The European Union and China: Shaping a Way Ahead After 50 years of Diplomatic Relations

08/02/2025
By Pasquale Preziosa

2025 marks the 50th anniversary of the establishment of official diplomatic relations between the European Union and China, as well as the 25th anniversary of the founding of the EU Chamber of Commerce in China.

However, the celebrations are taking place in a complex climate, marked by growing trade tensions, mutual distrust and an economic imbalance that is perceived as increasingly unsustainable.

According to Jens Eskelund (SCMP, 31 July 2025), president of the EU Chamber of Commerce in China, “the bilateral relationship has reached a turning point. Despite the advantages generated in the past for both sides, today the balance has been broken: the widespread perception in Europe is that China is reaping the lion’s share of the benefits, while European industries face competition that is often described as “unfair”.

In 2024, according to official European Commission data, EU exports to China reached £213.2 billion, while imports stood at £519 billion, generating a trade deficit of over £300 billion.

For Eskelund, the problem is not the deficit itself, but the loss of competitiveness of strategic European sectors. EU companies struggle to access the Chinese market due to regulatory barriers, forced technology transfer and favoritism towards local players, while Chinese companies enjoy broad access to the European market.

A prime example is electric vehicles:

‘When you buy a European car manufactured in China, 95% of the value stays in China. But in the case of a Chinese electric vehicle sold in Europe, the value that remains locally is close to zero.”

The growing imbalance has prompted a series of defensive measures by the EU, including:

  • Anti-subsidy investigations,
  • Provisional duties on Chinese electric vehicles,
  • Restrictions on access to public procurement in the medical sector above €5 million.

The Chinese reaction was immediate, with investigations into European brandy, pork and dairy products and the exclusion of EU companies from Chinese public tenders for medical devices worth more than 45 million yuan.

This spiral is exacerbated by geopolitical factors, in particular the war in Ukraine, with Beijing seen as too close to Moscow. The EU has sanctioned two small Chinese banks, accusing them of circumventing European restrictions. China has called for an immediate end to these practices.

In response to these developments, the EU has accelerated its “de-risking” strategy, focusing on:

  • Industrial resilience,
  • Economic security,
  • Supply chain diversification.

Chinese controls on rare earth exports have had a direct impact on European industry, reinforcing the urgency of reducing dependence on external suppliers.

The devaluation of the yuan (by more than 10% against the euro) and the fall in producer prices for 33 consecutive months have also increased competitive pressure on European companies.

According to Eskelund, a recalibration of the bilateral relationship is necessary: China’s access to the European market is an opportunity, but it must be placed within a more balanced framework of reciprocity.

Despite Beijing’s commitments to “open up” the market, concrete signs of liberalization are limited to non-strategic sectors, such as cosmetics and food, while industrial policies favor internal self-sufficiency (the “dual circulation” model).

‘All our members report that they have lost business opportunities solely because they are foreign-owned companies, even when they manufacture in China,’ Eskelund said.

At the root of the tensions is a structural misalignment in the Chinese economy: excess production capacity not balanced by strong domestic demand. Beijing is focusing on consumption-led growth, but the path will be long and uncertain.

‘The Chinese government is beginning to realise that it cannot continue to invest in industrial capacity that will remain unused. It needs to focus on sectors that fuel domestic demand,’ he said.

Despite the challenges, the European business community has no intention of abandoning the Chinese market. Opportunities remain, but the environment is more challenging and uncertain.

‘The next few years will not be a walk in the park. They will be turbulent,’ Eskelund concluded. ‘But we will get through this phase.’

The future of economic relations between the EU and China will depend on the ability to:

  • Correct structural imbalances,
  • Strengthen trade reciprocity,
  • Contain protectionist tendencies.

Only more transparent and balanced cooperation can prevent the fragmentation of global economic interdependencies.

The article was translated from the Italian from the article published on July 31, 2025 by the PRPchannel. And the article was republished with the author’s consent.

The featured image was generated by an AI program.