Guest Article by Chinese Consul General in Munich Qiu Xuejun in E.I.R. Weekly of the Schiller Institute of Germany

China-EU Economic Relations:

Not "Imbalanced", but Mutually Beneficial and Win-Win

Recent discussions in certain European circles have increasingly played up an alleged "trade imbalance" with China, alongside claims of "structural vulnerabilities" in the Chinese economy. The EU's merchandise trade deficit with China has been simplistically attributed to factors such as "overcapacity," "low-price dumping," and "trade diversion." Some have even called for trade remedy investigations and the imposition of high punitive tariffs, casting a shadow over economic and trade cooperation-long regarded as the "anchor" of China-EU relations. However, beyond selective data and biased rhetoric, the facts paint a different picture: the so-called "imbalance" is largely a statistical illusion and a cognitive misconception. China-EU economic and trade ties have never been a zero-sum game, but rather a deeply complementary and mutually reinforcing partnership built on shared gains, with a promising future ahead.

First, the evolving structure of China-EU trade is a natural outcome of global division of labor and the dynamic adjustments in the competitive strengths of both sides-not the result of deliberate actions by China. Historically, for the two decades prior to 1996, the EU maintained a long-standing trade surplus with China, driven by its advantages in high-end industrial equipment, automobiles, and precision instruments. At that time, Europe viewed this as a natural feature of global specialization. The reversal of this pattern today stems from objective differences in industrial development. Europe faces multiple internal constraints, including inconsistent standards across its 27 member states, cumbersome technical regulations, and lengthy approval processes-all of which reduce corporate responsiveness and market efficiency. Europe's share in high-tech industries has declined, and the competitiveness of its traditional sectors has gradually weakened. Furthermore, the Ukraine crisis has disrupted Europe's energy structure, leading to a sharp rise in industrial electricity costs. Over two-thirds of European manufacturing enterprises now face production costs that are 20% higher than those in China, further eroding their competitive edge. Meanwhile, China has steadily advanced its industrial upgrading, leveraging its vast domestic market, R&D innovation, and robust industrial and supply chains. In sectors such as new energy and equipment manufacturing, China has built comprehensive industrial advantages. China exports some of its products to Europe, which meet the continent's urgent demand for green transition-an inevitable outcome of market forces, not "unfair competition."

Second, the EU's own policies are a key driver of the so-called "imbalance," rather than any action on China's part. Europe has long maintained high-tech export controls on China, preventing advanced products such as high-end lithography machines and precision technologies from entering the Chinese market. To put this in perspective, the profit from a single lithography machine is equivalent to that from 200,000 tons of pork. If Europe were to relax its unjustified restrictions and fully tap into its export potential, the so-called "deficit" would be significantly alleviated. It is inherently contradictory for Europe to restrict its own high-value-added exports to China while accusing China of causing a trade imbalance.

More importantly, assessing China-EU economic and trade outcomes solely on the basis of the merchandise trade surplus is neither comprehensive nor objective. First, it is an indisputable fact that "the surplus stays in China, but the profits flow to Europe." A large number of European companies produce locally in China, with 40% of their output re-exported to Europe. While customs statistics record these as Chinese exports to the EU, the bulk of the value-brand premiums, technology patent fees, capital dividends, etc.-ultimately flows back to European parent companies. Take Volkswagen as an example: cars produced in China and re-exported to Germany contribute to Europe's recorded deficit, but the actual profits belong to the European enterprise. Second, nearly 50% of China-EU trade consists of intermediate goods. Chinese industrial equipment is, on average, 30% cheaper than comparable European products, directly helping European companies lower production costs and enhance the competitiveness of their end products-making China a "cost reducer" for European manufacturing. Third, Europe has long enjoyed a surplus with China in services trade. In 2024, the EU's services trade surplus with China exceeded US$50 billion. Revenues from intellectual property royalties alone amount to over US$10 billion annually. These core benefits have never been factored into the "imbalance" narrative.

As for accusations of "Chinese overcapacity" or "trade diversion," the data have long since debunked such claims. The EU's exports account for 25% of its GDP-far higher than China's 19%-and its overall surplus continues to grow. Germany's automotive exports represent 80% of its domestic production, European pharmaceutical companies typically generate over 80% of their revenues overseas, and Airbus derives more than 85% of its revenue from exports. In contrast, China's new energy vehicle sector exports only 10% of its output. A European Central Bank report clearly shows that in 2025, China's exports to the United States fell by US$104 billion, while exports to the eurozone increased by only US$32 billion-far lower than the increases to ASEAN and Africa-indicating no diversion of surplus U.S.-bound goods to Europe.

European companies are voting with their investments, affirming the irreplaceable nature of the Chinese market. In 2025, German investment in China surged by over 55%, while Swiss and British investments grew by 66.8% and 15.9%, respectively. Ninety-three percent of German companies in China plan to continue deepening their presence, and 80% of European pharmaceutical firms are expanding production capacity in China. China is a key export market for European high-end manufacturing, automobiles, and chemicals. Europe relies on China for 97% of its magnesium, 90% of its solar panels, and rare earth supplies. The industrial chains of both sides are deeply intertwined-so much so that gains and losses are shared.

Since the beginning of this year, quite a number of European leaders have made visits to China, signaling a steady warming of China-EU relations and injecting new momentum into economic and trade cooperation. China is now fully implementing its 15th Five-Year Plan, with the strategic focus on expanding domestic demand, steadily advancing institutional opening-up, and accelerating the creation of a new development paradigm centered on the domestic economy and featuring positive interplay between domestic and international circulations. China remains committed to openness and cooperation, and does not seek a trade surplus. By expanding domestic demand, increasing imports, and optimizing trade structures, China is working toward a more balanced economic and trade relationship-fully aligned with the goals of the 15th Five-Year Plan to foster innovative trade development and achieve higher levels of mutual benefit. Since first hosting the China International Import Expo (CIIE) in 2018-the world's first national-level exposition dedicated to imports-China will hold the ninth edition this year. The CIIE represents a major initiative to proactively open China's market to the world and has become a global public good shared by all. For Europe, rejecting protectionism, lifting unnecessary restrictions, embracing the Chinese market, and sharing in the vast opportunities offered by China's super-sized market and high-quality development would be a wise choice aligned with its own interests.

There are no "losers" in China-EU economic and trade cooperation-only "winners" in shared development. In the tide of globalization, win-win cooperation is the irreversible trend of the times. Standing at a new starting point, abandoning zero-sum thinking, deepening pragmatic cooperation, making the China-EU economic and trade "cake" bigger, and ensuring that the benefits of cooperation reach the people on both sides-this is the right path forward.