China and the European Union
The first meeting of the China-EU Trade and Investment Consultations (TIC) mechanism, held in Brussels at the end of June, produced a joint statement issued by China and the European Union (EU).
As key trade partners, the two sides agreed that the mechanism's primary objective is to strengthen ministerial-level dialogue on trade and investment policies, thereby stabilizing bilateral relations and making them more balanced.
"Tensions in China-EU economic and trade relations at present are higher than before," Tu Xinquan, dean of the China Institute for WTO Studies at the University of International Business and Economics, told South in a recent interview. "However, the very establishment of this mechanism demonstrates the willingness of both sides to prevent trade frictions from escalating into a trade war."
Friction now, but no trade war ahead
During talks in Brussels with Maros Sefcovic, the European commissioner for trade and economic security, on June 29, Chinese Commerce Minister Wang Wentao said China is not the root cause of the problems facing the EU, but rather a partner in solving them.
Wang noted that the EU trade and economic instruments and restrictive measures against China had disrupted normal China-EU economic and trade cooperation and undermined the stability of global industrial and supply chains.
Sefcovic stated that the EU is highly concerned about the trade balance. Under the TIC, the EU is willing to strengthen dialogue and consultation with China, manage differences, expand exports to China, and foster a more balanced and stable development of China-EU economic and trade relations.
China and the EU are each other's second-largest trading partners. According to statistics from China Customs, the total value of China's imports and exports with the EU reached 5.93 trillion yuan ($871 billion) in 2025, up 6% year on year.
The EU is the largest source of consumer goods imports for China and its largest export market for such goods. High-tech products account for more than one-quarter of goods traded between China and the EU. China's exports of wind turbine generator sets to the EU grew 65.9% in 2025, while imports of recycled products from the EU rose 18.9%. There is vast potential for cooperation between the two sides in the green sector.
Tu Xinquan did not deny a widening trade imbalance between China and the EU, but said it is "largely due to the growth in China's exports of new energy and chemical products."
Tu said that the Ukraine crisis and the U.S.-Israel war with Iran have driven up traditional energy prices in Europe, thereby boosting demand for new energy products. Similarly, oil and natural gas prices have eroded the EU's cost advantage in the chemical sector owing to the crisis and the war.
China, meanwhile, has maintained a relatively stable energy supply and steady prices, driving rapid growth in Chinese chemical product exports to Europe.
In 2025, the actual utilized foreign investment in China exceeded 1.2 trillion yuan. The EU ranked third, trailing only the Hong Kong Special Administrative Region and ASEAN. Investment from the EU amounted to approximately 110 billion yuan, a year-on-year increase of 18.4%, outpacing the growth rates of many other regions.
Notably, investment from the EU focused on sectors such as the green economy (new energy vehicles and clean energy), high-end manufacturing (automotives and chemicals), and biomedicine. The trend aligns with the concurrent rise in China's exports of new energy products and chemical raw materials to the EU.
Nonetheless, the revised Cybersecurity Act and the Industrial Accelerator Act recently released by the EU have violated World Trade Organization (WTO) rules and could cause substantive harm to China-EU economic and trade relations.
"While its legislation may contain discriminatory elements against China, the EU has not yet fully adopted the unilateral trade protectionism of the U.S. model," Tu noted.
He pointed out that most EU countries are relatively pragmatic. For one, the EU has seen China's firm determination to respond to the U.S.'s unilateral tariffs. For another, the EU has no reason to wage a trade war. Therefore, resolving trade frictions between China and the EU through dialogue and consultation is more rational.
Maros Sefcovic, European commissioner for trade and economic security, speaks during a press conference on China-EU relations in Brussels, Belgium, June 29, 2026.
Low-hanging fruit for the TIC
The TIC, launched at the end of June, appeared to send a positive signal for China-EU relations. China and the EU identified four initial workstreams: trade and investment balancing, export controls, intellectual property rights, and WTO reform.
Tu said none of these four issues are easy to address, but intellectual property rights and WTO reform may be easier to resolve than the other two.
On intellectual property, Tu said there is a high degree of consensus between the two sides on this long-standing issue. Both sides emphasize intellectual property protection.
"The direction is aligned despite ad hoc measures and methods. It's more of a technical issue than a political one. Hence, it's relatively easier to resolve," he added.
Intellectual property disputes, in Tu's view, are unlikely to spill over into the broader China-EU economic and trade relationship.
WTO reform is another area where China and the EU share a common direction, and both continue to support the organization.
"If China and the EU can reach a consensus on WTO reform, especially on specific action plans, or submit some joint proposals, this would be very positive progress," Tu noted.
He cited a November 2018 joint proposal by the two parties and other WTO members on reforming the dispute settlement procedure. He suggested other potential areas for joint proposals, including trade transparency, the status of developing countries, and regional negotiations.
Tu said he is optimistic that substantial outcomes can be reached at the second round of TIC talks this autumn.
He stated that the EU may at least offer some guarantees on investment reviews and investment security protection, and clarify its stance within the existing legal framework. In turn, China could clarify certain policies under the TIC, such as subsidies, to show the EU that they are not as extensive as perceived.
A turning point for China-EU relations
After a decade-long hiatus, China and Germany agreed in late June to relaunch the China-Germany Joint Economic Committee, with the next meeting scheduled for early 2027. This move could serve as a model for collaboration between China and other EU members.
The automotive and chemical industries are crucial to Germany, and both have been affected by current conditions, Tu said. BMW, Mercedes-Benz, and Audi have lagged behind in the shift toward electric vehicles.
"Given the changing industrial structure, China and Germany need to find new points of collaboration to form a new complementary and symbiotic relationship," Tu stated. Chinese and German enterprises can do more, and both governments can offer policy assistance.
Tu pointed to Audi's collaboration with Chinese driving-tech company Momenta as one example. In 2025, the two firms built what they called the industry's first driver-assistance system, combining Audi's engineering standards with Momenta's AI-based driving technology, known as its "Flywheel" model.
In a separate partnership, Volkswagen and XPeng brought their first jointly built car, the ID. Unyx 08, to production in March 2026, underscoring the value of their long-term strategic partnership.
Nordic EU member states are also relatively open on trade and economic issues and generally support free trade without friction with China. These countries also strongly support new energy products, and Chinese electric vehicles have been able to enter their markets relatively smoothly.
Reporter | Zhang Ruijun
Photo | CFP
