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China is the EU’s second largest trading partner for goods after the United States, with bilateral trade reaching €739 billion in 2023. This represents a decline of 14% compared to 2022. China is the EU's third-largest partner for exports and the biggest for imports. The EU-China trade balance has been persistently in favour of China. In 2023, the EU deficit amounted to €292 billion. EU exports to China amounted to €223.6 billion, whereas EU imports from China amounted to €515.9 billion, indicating year-on-year decreases of 3.1% and 18% respectively.
At the European Council in June 2023, EU Member States reaffirmed the EU’s multifaceted policy approach towards China, outlined in its 2019 strategic outlook. China is simultaneously a partner, a competitor, and a systemic rival.
However, the balance of challenges and opportunities presented by China has shifted over time. Our economic relationship is critically unbalanced, both in terms of trade flows and of investment, due to a significant asymmetry in our respective market openings. In addition, China’s economic model has brought about systemic distortions with negative spillovers to trading partners. According to the IMF, China’s use of industrial policies, notably its support to priority sectors, has an impact on trading partners.
For the EU, ensuring reciprocity, achieving a level-playing field, and addressing asymmetries in the relationship are matters of priority. The EU remains committed to addressing these challenges through dialogue with China and underscores the importance of the WTO as the best avenue to address the root causes of the current imbalance.
On 30 December 2020, the EU and China concluded in principle negotiations on the Comprehensive Agreement on Investment (CAI).
Trade picture
- On trade in goods, the EU has long had a trade deficit with China, which reached a record level of €396 billion in 2022.
- In 2023, the deficit decreased to €292 billion. However, it remains the EU’s second-highest bilateral deficit with China ever. In addition, imports from China have decreased in value, but they are reported to have increased in volume terms.
- In 2023, the goods that the EU most imported from China were: telecommunications equipment, electrical machinery and apparatus, and automatic data-processing machines.
- The goods that the EU most exported to China in 2023 were: motor cars and vehicles, medicaments, and other machinery.
- As regards trade in services, the EU has long had a trade surplus with China. In 2023, the surplus amounted to €14.1 billion. China is the EU’s fourth-biggest services trading partner after the United States, the United Kingdom and Switzerland.
- The cumulative value of EU foreign direct investment (FDI) stocks in China since 2000 stood at €177 billion in Q1 2024.
- EU FDI flows to China reached €6.4 billion in 2023 – a decrease of 29% compared with 2022. The top three sectors were the automotive sector, basic materials, and machinery.
- The cumulative value of Chinese FDI stocks in the EU-27 since 2000 stood at €143 billion in Q1 2024.
- Chinese FDI flows to the EU amounted to €4.7 billion in 2023, a decrease of 10% compared with 2022. The top three sectors were the automotive sector; health, pharmaceuticals and biotechnology; and information and communication technology.
- While mergers and acquisitions made up the bulk of China’s investments until 2021, in 2022 and 2023 greenfield investment made up most of China’s FDI in the EU.
- Consult the latest available data on investment between the EU and China.
The EU and China
The EU sees China as a partner for cooperation, an economic competitor, and a systemic rival. Recently, EU-China relations have become increasingly complex.
In recent years, the EU has conveyed its growing concerns regarding systemic imbalances that characterise the Chinese economy. China’s distortive industrial policies and practices – in particular with regard to widespread support for the manufacturing sector – create overcapacity in China, with negative externalities for a wide range of WTO members.
Another area of concern is China’s drive towards import substitution and self-sufficiency. While the EU welcomes efforts by the Chinese authorities to attract foreign direct investment, EU companies continue to face discrimination in the Chinese market, and it remains difficult for European businesses in China to compete due to the lack of a level playing field. Moreover, despite the Chinese government’s stated ambition to pursue a high-level opening of its market and build mutually beneficial trade partnerships, China still remains largely closed in many important sectors.
Many European companies feel that the business environment in China has become more politicised over the years. Economic challenges have increased, while regulatory obstacles have remained largely unchanged, which has further negatively impacted the business outlook. A complex and non-transparent legal framework on cybersecurity, combined with restrictive rules on cross-border data flows subject to broadly applied security approvals, insufficient enforcement of intellectual property rights and requirements leading to technology transfer, and a broad concept of national security all further affect the business environment.
The EU is committed to de-risking, not decoupling from China. This entails reducing critical dependencies and vulnerabilities, including in EU supply chains, and diversifying where necessary.
At the same time, recognising the importance of maintaining open communication channels, the EU continues to pursue cooperation with China at both bilateral and multilateral level. The EU and China discuss policies and issues regarding trade and investment in a range of dialogues, of which the most important are:
- The Annual EU-China Summit: Presidential-level exchange to enhance policy coordination on the most important issues, including trade, and;
- The EU-China High Level Economic and Trade Dialogue (HLED): a Vice-President of the European Commission and the Chinese Vice Premier meet to discuss issues. They are accompanied, if needed, by EU commissioners and Chinese ministers.
At global level, the EU is committed to working to reform the World Trade Organisation to respond to the challenges of the Green and Digital Transitions, while promoting a global level playing field. The EU calls on China to play a part commensurate to its economic weight to help achieve these reform objectives.
Trading with China
- Importing into the EU from China
- EU trade defence measures on imports from China
- Exporting from the EU to China
- Trade relations are part of the EU's overall political and economic relations with China
- China is a member of the World Trade Organization
- EU-China trade issues referred to the WTO Dispute Settlement Body by the EU against China and by others, including China against the EU
- The European Union Chamber of Commerce in China (EUCCC) celebrates European companies’ success in China, but also urges China's leaders not to turn inward
- The EU supports European SMEs in exporting to and investing in China, and also offers SMEs specific advice on IPR issues
Latest news
Today, the Commission launched a consultation request at the World Trade Organization (WTO), challenging China's initiation of an anti-subsidy investigation against imports of certain dairy products from the EU.
European Commission Executive Vice-President and Commissioner for Trade Valdis Dombrovskis met today the Chinese Minister of Commerce Wang Wentao.
Yesterday (27 August), the EU and China launched the first discussions under the new Cross-Border Data Flow Communication Mechanism.