Chinese Ambassador to Latvia Tang Songgen Pens an Article Titled ”Revisiting Facts of China-EU Economic & Trade Relations”

On 18 June, 2026, a signed article by H.E. Mr. Tang Songgen, Chinese Ambassador to Latvia, titled "Revisiting Facts of China-EU Economic & Trade Relations", was published on LA.LV, website of Latvijas Avīze ("Newspaper of Latvia"), in Latvian. Full text of its English version is as follows:

Recently, there have been some voices in Europe hyping the so-called "China-EU trade imbalance," claiming that the Chinese government subsidized some Chinese enterprises to boost their competitiveness, and that insufficient domestic demand and "involution" in particular industrial sectors have led to "overcapacity". 

Those people believe that it's China's behaviors aforementioned, combined with trade diversion from the United States, have resulted in an expansion of China's trade surplus with the EU and seriously impacted the European economy. 

In my opinion, such assertions are unfounded.

A trade surplus reflects comparative advantages and market competition. China's competitiveness does not stem from "involution", but rather from the integrate industrial and supply chain ecosystem, and its overall cost effective advantage. In 2025, China's innovation index ranked among the world's top ten. China's R&D expenditure intensity has reached 2.8%, higher than the OECD average. With 101 Lighthouse Factories, nearly half of the global total, China has built a systemic competitive edge, underpinned by sustained R&D investment, a world-leading supply chain, robust infrastructure, highly efficient labor, and an enormous talent pool.

China has steadfastly implemented a strategy of expanding domestic demand, with the endogenous momentum of its domestic economic circulation growing increasingly strong, making it an economy driven primarily by domestic demand. From 2021 to 2024, final consumption expenditure contributed an average of 56.2% to China's economic growth. In 2025, domestic demand accounted for 67.3% of China's economic growth, an increase of 8.3% compared with 2020.

China is no longer an export-oriented economy. Its dependence on foreign trade has fallen from 64% in 2006 to 32.7% in 2025, lower than the 37% of the EU and at a moderately low level globally. Meanwhile, the ratio of China's trade surplus to GDP has declined from 5-6% to the 2-3% range, approaching the 2% target agreed upon in consultations with the IMF.

In 2025, China's capacity utilization rate stood at 78%, with production mainly serving domestic consumer demand, broadly in line with the levels of other major industrialized economies. In the same year, China produced more than 16 million electric vehicles, of which only 2.61 million were exported, with the overwhelming majority sold in the domestic market. In addition, China's subsidies are primarily concentrated in the R&D stage and on the consumption side, and do not constitute prohibited subsidies under the rules of the World Trade Organization. China adheres to the principles of openness and fairness, with subsidy policies applied equally to all market participants. Foreign-funded enterprises, including European companies, are also eligible to benefit. China has also fulfilled its transparency obligations by promptly and comprehensively notifying the WTO.

Frankly speaking, the European Union is itself a major provider of subsidies. According to incomplete statistics, from 2021 to 2030, the European Commission is expected to provide more than 1.44 trillion Euros in various forms of subsidies, of which over 300 billion Euros has already been disbursed.

Global value chains have become deeply integrated. The production of a single product has long transcended national borders. This interdependent division of labor, where "you are in me, and I am in you", allows each participant to specialize in the stages they do best, before assembling them into final consumer goods. According to preliminary statistics, one-third of China's foreign trade and exports are generated by foreign-invested enterprises operating in China.

Many European companies have maintained long-term investment in China, and localized supply chains have become highly prevalent, which has objectively reduced China's imports from Europe. For many new products and technologies developed by European companies in China, while serving the Chinese market, they are also shipped back to Europe, contributing a considerable share of China's exports to Europe.

This structure has also given rise to an interesting phenomenon: although China records a surplus in merchandise trade on paper, a large share of these goods is produced by European companies in China, meaning that much of the profits ultimately flow back to Europe. This has created a situation in which "the trade surplus is in China, while the profits are in Europe."

Meanwhile, China's high-quality and competitively priced products have broadened the choices available to European consumers, helped ease inflationary pressures, and supported Europe's green transition.

Nearly half of China-EU trade consists of intermediate goods. It seems that China-exported intermediate goods currently are an indispensable part of the European production and supply chains. China's rare earths are also essential for Europe's automotive, medical, aerospace, and other important industries.

It should be noted that while China has a surplus in goods trade with the EU, the latter has a services trade surplus. According to Chinese statistics, in 2025, China's services trade deficit with the EU was US$48.3 billion, making the EU the largest source of China's services trade deficit, and the share was 41.6%. Taking intellectual property royalties as an example, China paid the EU up to US$10 billion last year.

It should be emphasized that China has never deliberately pursued a trade surplus. Instead, it maintains an active and open attitude toward addressing the trade imbalance between China and Europe, and is willing to expand imports from Europe in order to promote a more balanced growth of bilateral trade.

China has hosted the China International Import Expo for nine consecutive years, making strong efforts to expand imports from the European Union, including actively broadening market access for European agricultural products. At present, pork from 15 EU member states and poultry from 7 member states have been approved for entry into the Chinese market.

At the same time, China is also strengthening regulatory constraints on exports. Since April 1 this year, China has abolished VAT export rebates for products such as photovoltaics, and reduced the VAT export rebate rate for battery products from 9% to 6%. It has also tightened export controls on key commodities, introducing export licensing requirements for products including pure electric passenger vehicles and certain steel products.

Traditional Chinese culture embraces the ideals of "the whole world is one community" and "when one prospers, one should help benefit the world," rejecting the Cold War mentality that a strong nation will inevitably seek hegemony. China has found a development path suited to its own national conditions and is advancing steadily through Chinese modernization.

With a population of 1.4 billion and a vast domestic market, China continues to inject strong and sustained momentum into its economic development. China has set the goal of doubling its per capita GDP by 2035 compared with 2020, reaching around US$21,000. This implies an average annual GDP growth rate of approximately 4.17% over the next decade. China's development represents an opportunity for the world, including Europe.

The essence of China-Europe economic and trade relations lies in complementarity of strengths, mutual benefit, and win-win cooperation. China welcomes Europe's efforts to enhance its competitiveness, but China opposes the politicization of economic and trade issues by the European side, as well as the overstretch the concept of security. It also opposes the use of enhancing competitiveness or safeguarding economic security as a pretext for protectionism.

Addressing the trade imbalance between China and Europe cannot rely on China's efforts alone; it requires joint efforts from both sides. China hopes that the European side will work in the same direction, resolve differences and frictions through dialogue and consultation, and achieve a dynamic balance in China-Europe economic and trade relations through continued development, so as to benefit both sides and their peoples.