BEIJING: Economic relations between China and Europe are expected to face a difficult time in 2024, with several burning issues increasingly difficult to resolve, according to the president of the European Chamber of Commerce in China, Jens Eskelund (pictured).
In an interview with The Straits Times, he said: “We are approaching a point where the old model no longer works, and both sides need to recalculate and decide what the new relationship should look like.” » Eskelund took over as head of the chamber about six months ago.
The “old model” cited by Eskelund, who is also Danish shipping giant Maersk’s main representative for Greater China and Northeast Asia, has led to the EU having a record trade deficit of 396 billion euros with China in 2022.
This record trade deficit has made headlines and raised concerns in Europe about its dependence on China. EU Ambassador to China Jorge Toledo in September called the bloc’s deficit with China “the highest in human history.”
Chinese vehicles and machinery exported to Europe account for about half of China’s trade surplus with Europe. The rest includes chemicals, energy and other manufactured goods.
Compared to China, the EU’s trade deficits with the US and ASEAN were $202.5 billion and $56.4 billion, respectively.
Eskelund, who has lived in China for 25 years, said that given China’s slow recovery since reopening in the face of Covid-19, the country has not been able to absorb its products domestically. As a result, the global factory exports larger volumes globally, including to countries in Europe.
Besides the export of Chinese overcapacity, other controversial issues have surfaced. These include Europe’s desire to de-risk its economy in order to secure supply chains and limit the extent of its technology sharing, as well as China’s decision to strengthen security with a series of new laws that foreign companies say make it more difficult. them to operate there.
Eskelund said: “I expect 2024 to be difficult. »
During a visit to Beijing in September for an annual high-level trade dialogue, EU Trade Commissioner Valdis Dombrovskis said relations between Europe and China were at a crossroads.
Dombrovskis said China and the EU can choose a mutually beneficial path or one that “slowly moves us apart, where the shared benefits we have enjoyed… weaken and fade.”
China’s refusal to condemn the Russian attack on Ukraine, European companies’ lack of access to the Chinese market, and the EU’s ongoing investigation into China’s electric vehicle industry to check unfair pricing are among the thorny questions.
The EU’s investigation into subsidies provided by the Chinese government – to its new energy industries, in particular – has led Beijing to accuse Europe of protectionism, sparking concerns within the world’s second-largest economy over the decision the continent to reduce risks to its economy and increased scrutiny of the record trade deficit will further damage relations.
“My personal fear, and that of the House, is that this is the start of many (investigations),” Eskelund said. “We hope to find ways to prevent this from turning into a vicious downward spiral.” »
He explained that the European strategy to reduce risks to its economy comes after the continent realized that it was dangerous to rely on a single dominant source for its basic needs, as in the case of the Russia, its main gas supplier, when President Vladimir Putin attacked Ukraine in February 2022.
The EU, which introduced sanctions against Russia after the invasion, aims to end its dependence on Russian fossil fuels by 2027. Europe experienced a gas and fuel crisis in 2022 due to the war in Ukraine, Russian oil sanctions and the consequences of this crisis. of the Covid-19 pandemic.
“When we saw how dependent Europe had become on Russian energy, it makes sense to go out and (diversify)” to protect against black swan events such as the Russian invasion and the Covid-19, Eskelund said.
He also denounced what he sees as a double standard by the Chinese, who are trying to be self-reliant in areas such as technology and agriculture.
“China has massively de-risked relative to the rest of the world, in its own way, and it has gone much further than Europe would have ever considered,” Eskelund said.
He stressed that “China talks about autonomy (and) Europe talks about diversification.”
The result of the EU’s de-risking will “probably be a small single-digit percentage reduction” in trade between China and the EU for specific products that Europe needs and that China is currently in need of. the main supplier, he added.
China will also have to better demonstrate what value creation is for Europe, given the huge existing trade deficit, “because I think that argument has not been demonstrated”, he added.
“Now we can supply cheap products, but what (China) actually does for Europe?”
Taking the example of electric vehicles, Mr. Eskelund said that “if you import a car from China, almost 100% of the added value is in China. It’s not in Europe.”
“This is clearly unsustainable. China exporting its excess capacity to Europe could lead to deindustrialization. I am not sure that Europe can accept this,” he added.
China’s decision to step up its security also worries European companies operating in the country – an issue Mr Eskelund is working to clarify in the interests of the chamber’s approximately 1,700 members.
A new anti-espionage law came into force on July 1, with foreign companies concerned that vague areas of the legislation could put them in the crosshairs of authorities. In 2017, China also implemented a cybersecurity law that allows the state to “take measures to monitor, defend against, and manage cybersecurity risks and threats within and outside the country.” China.”
Eskelund said the new security laws may be “inherently incompatible” with China’s desire to attract foreign business and investment – as has often been repeated by state media and the country’s political elite. country – and helping its members navigate the uncertainty and vagueness of Chinese legal jargon is an area the business advocacy group is focusing on.
For example, major European pharmaceutical companies face the problem of not being able to transfer data from their clinical trials in China out of the country due to data security and privacy laws.
“European companies are currently uncertain about the relationship China actually wants to have with them,” he said.
“A lot of companies are starting to wonder, with the emphasis on security, with the emphasis on autonomous supply chains, whether a presence in China will require me to start developing a separate supply chain for China and one for the rest of the world.
To ensure that both sides commit to a fairer relationship, it will be important to remember that trade ties between China and the bloc have been hugely beneficial for both sides, for consumers in Europe and for economic development in China, Eskelund said.
“Europe is in many ways dependent on China for what it needs, for its decarbonization (goals) and just to operate with components sold from China. But Europe is also very important to China because the incredibly large quantities of products produced there create jobs and generate taxes (for China),” he added.
So, “Europe and China have a very, very important inherent mutual interest in finding solutions (together),” Eskelund said.
“But I think it starts with recognizing the concerns on both sides,” he added. -The time of the straits/ANN
