BEIJING – Economic ties between China and Europe are set to hit a challenging patch in 2024, with several hot-button issues increasingly difficult to tackle, according to the president of the European Chamber of Commerce in China, Mr Jens Eskelund.
In an interview with The Straits Times, he said: “We are approaching a point where the old model doesn’t work, and the two sides need to recalculate and decide what the new relationship should be like.” Mr Eskelund took over the chamber’s top role about six months ago.
The “old model” referred to by Mr Eskelund, who is also Danish shipping giant Maersk’s chief representative for Greater China and north-east Asia, has resulted in the EU having a record €396 billion in trade deficit with China in 2022.
This record trade deficit has made headlines and sparked concerns in Europe about its reliance on China. EU ambassador to China Jorge Toledo in September described the bloc’s deficit with China as the “highest in the history of mankind”.
Chinese vehicles and machinery exported to Europe make up about half of China’s trade surplus with Europe. The rest comprises chemicals, energy and other manufactured products.
Compared with China, the EU’s trade deficits with the United States and Asean were at US$202.5 billion and US$56.4 billion, respectively.
Mr Eskelund, who has lived in China for 25 years, said that given China’s sluggish recovery since its Covid-19 re-opening, the country has not been able to absorb its products domestically. As a result, the world’s factory has been exporting in bigger volume globally, including to countries in Europe.
Besides the export of China’s over-capacity, other contentious issues have surfaced. These include Europe’s drive to de-risk its economy so as to guarantee supply chains and limit how widely it wants to share its technology as well as China’s move to step up security with a slew of new laws that foreign firms say make it more difficult for them to operate there.
Mr Eskelund said: “I do expect that 2024 is going to be difficult.”
During a visit to Beijing in September for an annual high-level trade dialogue, trade commissioner for EU Valdis Dombrovskis said ties between Europe and China are at a crossroads.
Mr Dombrovskis said that China and the EU can choose a mutually beneficial path or one that “slowly moves us apart, where the shared benefits we enjoyed… weaken and fade”.
China’s refusal to condemn Russia’s attack on Ukraine, European firms’ lack of access to the Chinese market, and an ongoing EU probe into the Chinese electric vehicle industry to check for unfair prices are among the thorny issues.
The EU probe into the subsidies that the Chinese government provides – to its new energy industries, in particular – has led to Beijing accusing Europe of protectionism, raising concerns in the world’s second-largest economy that the continent’s move to de-risk its economy and an increased scrutiny on the record high trade deficit will damage ties further.
“My personal fear, and the fear of the chamber, is that this is the start of many (probes),” Mr Eskelund said. “We hope to find ways to avoid turning this into a vicious downward spiral.”
He explained that Europe’s strategy to de-risk its economy comes after the continent’s realisation that it is dangerous to rely on one dominant source for necessities, as in the case with Russia, its top gas supplier, when president Vladimir Putin attacked Ukraine in February 2022.