EU's extensive wishlist for China

Brussels' readout of the 25th China-EU Summit was replete with charges. It's a significantly harsh tone compared to what European Commission (EC) President Ursula von der Leyen struck in April, urging both sides to support a "strong reformed trading system", representing a carefully calibrated signal of cooperation.

True, the EU runs a massive trade deficit in goods of €305 billion with China. While this gives a colossal leverage to the bloc and strengthens its bargaining position in bilateral talks, Brussels' extensive wishlist muddles its ambitions to overcome the stumbling blocks, posing challenges to a "mutually beneficial" relationship.

Indeed, trade with China has benefited European consumers, providing them greater access to cheap products and supporting 3 million jobs. Mutual investments have augmented European companies' profits. The country's capital inflows in electrical vehicle and battery manufacturing and the China-EU energy cooperation could enhance EU's production capacity and ensure its energy security, bringing economic prosperity and accelerating green development.

After all, it was China whose imports and capital influx assisted to prop up Europe's creaking economies during the European sovereign debt crisis. Although it was seen as a strategic move to help itself, China's support at a critical time bolstered European ability to navigate one of the nastiest economic challenges.

The EU has been accusing China of flooding the global markets with subsidised overcapacity. Beijing's competitive advantages including affordable labour costs, efficient supply chains and large economies of scale, producing more goods at significantly lower prices, are some of the major drivers behind its export boom.

China has leveraged its low-cost production and immense innovation capabilities in advanced industries to make an increasing number of Chinese companies formidable global competitors. By frequently staying ahead in innovation, Beijing continues to lead or is on a par with global leaders in commercial nuclear power, electric vehicles and batteries and make progress in key sectors like robotics, biopharmaceuticals and artificial intelligence.

The East Asian economy is a global manufacturing leader and a lynchpin of the global supply chain owing to its decades-old strategic policies that were envisioned to transform the country into a manufacturing powerhouse through industrialisation, skilled labour force, robust infrastructure and integrated supply chains. As a result, China's share in world gross production in 2023 was estimated to be three times of the US, six times of Japan and nine times of Germany.

Over the last decade, China has revolutionised its manufacturing industry, from one focusing on output to that centering quality and innovation. Service industry, green development and domestic consumption presently are the core components of the country's economic growth, with value-added manufacturing continuing to rise.

Beijing's share in global value-added manufacturing has risen from less than 9% in 2004 to nearly 28% in 2024 and it is forecasted to account for 45% of the world's industrial production by 2030 compared to the 11% of the US. Industrialisation has played a vital role in China's "remarkable" achievement of lifting 800 million out of poverty and contributing to nearly 75% reduction in extreme poverty globally, the top UN sustainable development goal.

One of the EU's major concerns is China's export controls on rare earth elements (REEs). While these raw materials are critical in producing a gamut of gadgets like smartphones, laptops and electric vehicles, they can be used to develop missiles, fighter jets and drones. Beijing may argue that its curbs are in line with EU's own practices to prevent the misuse of these dual-use items and contribute to global peace and non-proliferation efforts.

As per the Eurostat, Brussels imported 12,900 tons of REEs in 2024 — 46.3% from China, 28.4% from Russia and 19.9% from Malaysia — while exporting 5,500 tons to other countries. The data contests the EC claim that EU relies on China for 98% of its REEs supply and weakens its position against Beijing vis-à-vis latter's trade with Moscow.

The EU, or to put it straight, von der Leyen's China approach is markedly different from the European leaders who when visiting Beijing sought to build a "powerful partnership", struck trade deals and pursued to deepen cooperation to tackle climate change, hasten green transition and uphold free trade and multilateral trading system.

More recently, Brussels has been looking to chart its own independent path to assert itself as a leading geopolitical and economic player. By trimming its demand list to trade and investment, EU could extract more concessions from China, allowing itself to expand exports and strengthen its commercial footprint in the large Chinese market.

A more balanced approach, containing a concise rather than exhaustive list of demands, will further help build a collective response to US President Donald Trump's economic bullying and threats emanating from his actions to the multilateral trading system and rules-based international order. The EU needs to close these loopholes in its foreign policy to engage China on better footing.