The global economy is an expansive, interconnected system where individual actions are deeply tied to their surrounding environment. By harnessing this diversity and working together through mutual support and synergy, any single point can withstand multiplied pressure.
China-Europe economic and trade relations increasingly mirror those between China and the United States, marked by trade imbalances, rising friction, escalating competition, and widening differences. Long-term expectations among many academic and business communities remain pessimistic. Should economic and market-related disputes become increasingly politicized, a full-scale trade war could erupt.
In March, Chinese Foreign Minister Wang Yi emphasized that the essence of China-Europe economic and trade relations is “mutually complementary”, and that dynamic balance can be achieved entirely through development. On June 29, Chinese Minister of Commerce Wang Wentao and European Trade Commissioner Maroš Šefčovič co-chaired the inaugural meeting of the China-Europe trade and investment consultation mechanism in Brussels. Both sides agreed that bilateral economic and trade challenges must be properly handled and committed to seeking practical, viable solutions. At the negotiating table, both parties maintained a restrained posture, signaling that neither wants to derail the relationship. If retaliatory tools are expanded to suppress one another, nobody will win. Every macroeconomic measure ultimately translates into the living costs borne by ordinary people. Visiting Mumbai on October 20, U.S. Secretary of State Marco Rubio candidly acknowledged in a media interview that a U.S.-China trade war would have been “devastating to the global economy”.
Maintaining open, effective communication between Brussels and Beijing is crucial for managing China-Europe relations. Enhanced dialogue deepens mutual understanding, clarifies regulatory expectations, prevents policy misinterpretations, and improves overall policy implementation.
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Recent high-level dialogues and consultations have yielded positive progress. In early October, the two sides held in-depth discussions in Beijing regarding hybrid and electric vehicle trade issues, reaching specific arrangements. Subsequently, Chinese authorities announced that the value-added tax export rebate rate for new energy vehicles would be reduced from 13% to 9%, effective April 1, 2027. Export tax rebates for Chinese photovoltaic products and batteries have also been comprehensively canceled or progressively reduced to zero. These adjustments aim to curb volume-driven domestic price wars, raise export thresholds to restore order, and optimize industrial structure, serving the sustainable development of China’s economy.
However, this can only be regarded as a temporary measure to ease tensions. Core issues remain unresolved, with persistent disagreements over trade imbalances, industrial subsidies, and market access. Moreover, it remains uncertain whether markets, businesses, societies, and the general public on both sides can smoothly adapt to these policy shifts.
The timing of policy decisions requires careful and nuanced calculation. This is a factor that is easily and significantly underestimated, and it places an even greater test on strategic maturity.
Meanwhile, conflicts in the Middle East, support for Ukraine, immigration, and other issues have heightened anxiety across Europe. Rising living costs, climbing unemployment, deteriorating public services, and educational resource shortages have fueled widespread public dissatisfaction, sparking ongoing protests across several European countries. It is against this turbulent backdrop that European leaders are negotiating with China under heavy domestic pressure.
The widening trade imbalance remains the central obstacle; Europe’s major trading partners can no longer ignore this “elephant in the room”. In October, German President Frank-Walter Steinmeier visited China. Well-versed in Chinese affairs, he gained first-hand insights into the latest shifts in China’s business environment, economic strength, and industrial structure. In a speech at Peking University, President Steinmeier mentioned “Aus Win-Win darf kein Win-Lose werden” (“A win-win must not turn into a win-lose”), emphasizing that mutual benefit must not come at the expense of one party.
Amid a shifting geopolitical landscape, Beijing needs to accurately assess policy costs and their implications for EU interests, make strategic decisions grounded in China’s realities, and adjust the pace of negotiations accordingly. Boosting domestic demand, strengthening social welfare, fostering a fair and orderly market environment, and cultivating an innovative ecosystem require long-term, sustained investment from China itself.
The fundamental solution to rebalancing lies in high-quality institutional provision, which includes rule and standard alignment, contract enforcement, market order, and openness. A self-sustaining market order stems from entrepreneurial spirit and a supportive innovation system. China and Europe must proactively manage expectations, prioritize smaller and more manageable areas for steady progress, and secure long-term commitments to lay the groundwork for broader breakthroughs.
1. Competition rules and institutional improvement: This aims to protect the EU’s long-term interests through measures aligned with World Trade Organization (WTO) core principles while advancing China’s push to uphold the multilateral trading system. Current WTO rules contain notable gaps and gray areas regarding digital trade and the green transition. The expansion of executive power and “de-institutionalization” continually squeeze market space. China and EU members share a responsibility to improve WTO rules through consultation, ensuring the multilateral system keeps pace with technological and market developments. Respecting order also requires designing better order.
In global trade and investment, cross-border data flows are expanding rapidly. Enterprises engaging in cross-border commerce must secure international supply chains and prevent compliance risks through data sharing. Therefore, in areas like supply chain traceability, new energy, and carbon trading, both sides should establish fact-based dialogue mechanisms, support independent international dispute evaluations, and enhance the objectivity of negotiations.
2. Deepening Two-Way Industrial Engagement: As more Chinese enterprises build factories, conduct R&D, and invest directly in Europe, they employ local staff and pay local taxes. This “European localization” will increasingly bind China-Europe economic interests. Conversely, European companies seek to deepen their presence in the Chinese market, uncover new business, and grow local profits. China should continue creating conditions for European enterprises to participate in policy dialogue, legislative consultations, and industry rule-making, while integrating them into urban regeneration reforms to drive innovative business models.
Globally, new cooperation opportunities are emerging in third-country markets. For instance, China, Germany, and India could enhance collaboration on pharmaceutical R&D and investment in Africa. This can encourage joint efforts in biomaterials, medical exchanges, and academic research, expanding their reach in global pharmaceutical markets. Combining strengths will strengthen global innovation capabilities and help traditional Chinese medicine (TCM) expand internationally while aligning China’s domestic medication standards with global frameworks.
3. Technological autonomy, openness, inclusion, and synergy: The new technological revolution offers unprecedented momentum for solving longstanding global challenges, and no nation wants to fall behind. Yet climate change, pandemics, and accelerated AI development have triggered common governance crises. Preserving institutional channels for China-Europe knowledge exchange helps detect policy blind spots, reduce implementation friction, and rebuild social trust. Both sides should expand multi-point technical ties, encourage communication between foreign enterprises and local research institutions, and promote joint research and data sharing.
This summer, persistent high temperatures and below-average rainfall have caused water levels in rivers across several European countries to continue declining, posing a threat to Europe’s economy and the livelihoods of its people. In practical efforts to strengthen climate change resilience, governments, businesses, and various sectors of society in China and European countries should work together to address a wider range of challenges. For example, there is significant potential to expand new areas of China-Europe cooperation in the commercial space sector. Satellite remote sensing technologies and space science research can be harnessed to promote global sustainable development, with a particular focus on supporting weather observation and analysis, environmental protection, agricultural monitoring, and emergency disaster response. The United Nations’ Space2030 Agenda emphasizes that the peaceful use of outer space and space-based technologies has become an important driving force in addressing humanity’s long-term sustainable development challenges.
Public policy must remain relevant to the times and respect Lebenswelt (the lived realities of everyday life). This demands that policymakers update their decision-making models and align their actions accordingly.
Ultimately, the optimal path forward for China-Europe relations lies in economic cooperation, balanced interests, and mutual understanding of each other’s priorities. By offering multi-level solutions that accommodate both parties, ample room exists to achieve a lasting rebalancing of bilateral ties.
