What does the EU Trade Commissioner expect from his trip to China?

European Commissioner Maroš Šefčovič is heading to China as companies there come under the EU's scrutiny, but what is he after in the context of the escalating trade war with the United States as the EU and China converge?

For the first time since taking office, Šefčovič will travel to China on 27 and 28 March, where he will meet with Chinese Vice Premier He Lifeng, Customs Minister Sun Meijun and Commerce Minister Wang Wentao. Šefčovič's visit to this Asian power will be closely monitored against the backdrop of tense trade negotiations with the Americans. Here are five things he hopes to achieve from his trip to China.

1. Send a signal to Washington

"The EU wants to signal that the harder it hits, the more it could push the Europeans closer to China," he told Euronews Victor Crochet, China expert at Nishimura & Asahi. With the US imposing tariffs on aluminium and steel and the next tranche of reciprocal tariffs starting to apply on 2 April, the EU may seek closer relations with China, the world's second largest economy after the US.

This could be good news for the Asian giant, which is also affected by the US tariffs. "China is the one that needs the EU the most because it has a trade surplus vis-à-vis the EU. But it will not show it because the EU is also in a difficult situation because of the US," claims Alicia García Herrera, an expert from the Bruegel think tank.

2. Reopening diplomatic dialogue

The previous Commission left relations with China strained after a dispute over Chinese electric vehicles (EVs) culminated in the EU imposing 35 % tariffs on Chinese imports and China responding with tariffs on European brandy and cognac. Since Covid, the EU has also sought to reduce its dependence on China, particularly for critical raw materials.

According to the Deputy Director-General of the Trade Commission Marie Martin-Pratové the new strategy aims to "reduce risk through diplomacy". "We want to base our relationship with China on a combination of engagement but also protection," said the EU official at an event in Brussels ahead of Šefčovič's trip. "We have abandoned any notion of a smooth and equal relationship," admitted in relation to market distortions and subsidies. 

Herrera said that Šefčovič will explore the possibilities arising from the poor EU-US relations, but will also come with a portfolio of EU investigations into unfair trade practices to warn China.

3. Pressure China to act against its overcapacity

Chinese overcapacity is a nightmare for Europe. "China is doing nothing to address it," says Martin-Pratová. And with US tariffs on Chinese products, China risks shifting more production to the European market.

Steel, cement and timber are among the key exports from China to the US that could be diverted to European markets in the current tariff storm. "Chinese demand for these products has fallen due to the halt in real estate construction," Hard Crochet. Computers, electric cars and renewable energy sources such as solar panels and wind turbines are also on China's overcapacity list.

"To address overcapacity, the EU wants China to move from a model based on trade subsidies and exports to one based on the domestic market," Crochet added.

4. Removing barriers for European companies

European companies are complaining about barriers to doing business in China, with data transfers from European companies based in China to their overseas subsidiaries requiring a green light from the Cyberspace Administration of China (CAC). In 2023, an interim agreement was found between the EU and China to speed up the approval process, but as Herrera pointed out, "for European companies producing large amounts of data, whether financial or service-related, this is a major issue".

5. Attract more Chinese investment

The EU wants to attract Chinese investment. "Europe has a strong position in this area," explained to Euronews Sacha Courtialan expert from the Delors Institute: "We are opening our market on our terms, i.e. creating jobs in Europe and asking for technology transfer. This is the idea behind the production of Chinese electric cars in Europe."

Chinese electric car giant BYD, which has already started operations in Hungary, is considering opening a production and assembly plant in Western Europe to avoid EU tariffs.

euronews/ gnews.cz - RoZ