China and the European Union saved face at their summit in Beijing late last week by agreeing a joint statement on climate change affirming their commitment to the Paris Agreement. They promised more co-operation in areas like energy transition and controlling methane emissions and said they would submit updated climate plans for 2035 in time for this year’s COP30 summit in Brazil.
Most of the meeting saw the two sides rehearsing their differences, particularly on trade and Russia’s war in Ukraine. European Commission President Ursula von der Leyen said that the widening trade imbalance meant that relations were now at an inflection point. The EU’s trade deficit with China has doubled over the past decade. Chinese consumers have lost much of their appetite for high-end European imports and the country’s manufacturers are producing too much for the domestic market to absorb.
This means greater pressure to export and Brussels fears that as other markets such as the US raise trade barriers more Chinese manufactured goods will come into the Europe.
China rejects the charge of overcapacity in its manufacturing system but its negotiators told Von der Leyen that they were worried about what they call “involution.” This is when competition becomes so brutal that it pushes down prices, profits and wages, leading to a deflationary spiral.
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Beijing’s recognition of the problem does not mean that it will agree to remedies that will ease European anxiety about the trade relationship. But it opens up the possibility of a greater understanding of one another’s positions.
The same cannot be said for the issue of Ukraine, where the EU accuses China of going beyond diplomatic and economic support for Russia by exporting dual use technology that could help Vladimir Putin’s war effort. Beijing says it strictly controls such exports but has made clear that, although it seeks an early end to the war, it does not want an outcome that will leave Russia weaker and in danger of falling into a western sphere of influence.
