President of the European Union Chamber of Commerce in China
There are concerns the EU is too economically dependent on China, leading to calls for it to diversify its trading relationship. When evaluating how best to achieve this, the EU must avoid overestimating the risks and underestimating the benefits of engagement. To successfully do this, better intelligence will be needed.
First, more work should be done to identify where the EU’s critical dependencies on China lie specifically. China is the EU’s largest trading partner, however its exports to the EU consist mostly of non-essential and easily substitutable goods. There are critical dependencies in some areas, most notably concerning Chinese rare-earth metals and pharmaceutical products. But it is important that blanket policies are not adopted in response.
Second, there is a need to better understand the potential limitations of China’s willingness to exert economic leverage on the EU. The European market’s importance as a destination for Chinese exports is roughly double that of the Chinese market’s importance for Europe. EU-China trade also creates a healthy number of jobs in China. With China’s growth projected to be underpinned by exports for the foreseeable future and US-China tensions rising, there are likely limitations to China’s willingness to risk undermining its relations with a second major trading-partner.
Finally, the costs to Europe of not fully engaging with China should be further explored. European multinational companies regularly report that operating in China keeps them profitable, innovative and globally competitive. Furthermore, from a government perspective, global challenges, including climate change, cannot be tackled without the involvement of China.