EU Business Leader Warns of Rising Chinese Exports to Europe

The rapid growth of Chinese exports to Europe has raised alarms among European business leaders. Jens Eskelund, president of the European Union Chamber of Commerce in China, emphasized the need for the Chinese government to restore better alignment between demand and supply during an interview with Euronews. The surge in exports follows the announcement of substantial import tariffs by the United States in April 2024.

Eskelund noted that in the first half of this year, Chinese exports to North America have declined significantly. He described this shift as a potential trade diversion but clarified that it does not fully explain the situation. The increase in exports to Europe can be attributed to several factors: the competitiveness of Chinese firms, a weaker currency, and robust state support.

European businesses operating in China are feeling the pressure. According to a recent survey by the EU Chamber of Commerce in China, 73% of respondents reported that conducting business in China is becoming increasingly difficult, with overall confidence at a low point. Additionally, 52% indicated that the business environment has become more politicized compared to the previous year. Eskelund stated, “The pessimism that you see right now is primarily due to the state of the Chinese economy,” highlighting intense competition and overcapacity in various sectors.

While the situation remains challenging, Eskelund believes that prospects could improve if China focuses on balancing supply and demand. He reiterated, “We really think the Chinese government right now needs to focus on how do we get back to a situation where demand and supply are in better alignment than is the case today.”

The shift in trade flows from the United States to Europe could have severe implications for European industries, particularly if Chinese imports are offered at significantly lower prices, which could strain local producers. Nevertheless, the European Commission has not observed any alarming increase in such trade diversions. Olof Gill, a spokesperson for the EU Commission, stated, “Our assessment at present moment is that there is no such increase that is a cause for alarm.”

Ongoing Tensions and Trade Imbalances

The relationship between the European Union and China has been marred by ongoing friction, stemming from limited market access for European firms, growing trade imbalances, and China’s support for Russia amid its conflict with Ukraine. This tension was evident during the EU-China summit in July 2024 when Ursula von der Leyen, President of the European Commission, warned that relations had reached an “inflection point.” She called for immediate action to rebalance trade following the EU’s trade deficit with China, which reached a staggering €305.8 billion in 2024.

Von der Leyen criticized China’s recent decision to restrict exports of seven critical raw materials, a move that many in Brussels view as a stark reminder of Europe’s dependency on Chinese resources. In light of this, Eskelund suggested that governments should adopt a business-like approach. He urged that, like businesses, governments need contingency plans when key supply sources become unreliable.

Eskelund stated, “One of the things that we have learned in recent years is that we always need to have a plan B and perhaps even a plan C.”

With increasing pressure from the United States for a tougher stance on China and ongoing trade imbalances, Eskelund warned that tensions between the EU and China are likely to escalate if no actions are taken. He remarked, “We don’t think that anything is unavoidable, but we think that we are on a trajectory where we need to stop and ask ourselves: are we right now increasing the risk?”

To prevent further deterioration of relations, Eskelund encouraged both parties to engage in constructive dialogue and address each other’s concerns before the economic fallout becomes too severe. “It’s very difficult for us to predict what the future looks like, but all this volatility right now is something that affects business behaviors, and I think that right now is a big challenge,” he concluded.

The complexities of EU-China relations and the implications of increased Chinese exports will require careful navigation by policymakers and business leaders alike.