Who will China sell to?
From Nikkei Asia, June 26:
Bloc leaders ready diversification tool but still split on how hard to push Beijing
Chinese companies are bracing for tougher regulations in the European Union after leaders agreed on the need to address the bloc's trade deficit with China, which has ballooned to over 1 billion euros ($1.13 billion) a day.
The European Commission -- the EU's executive branch -- is preparing a diversification instrument that would require businesses to expand their supply chains so that they are not reliant on a single country, a decision made during a summit last week. The commission also is considering introducing sector-wide tariffs to avoid being overwhelmed by Chinese imports.
Chinese companies are urging EU leaders to be measured in their approach, saying their businesses are entrenched in the European ecosystem.
"The key concern is that future measures remain proportionate, evidence-based and genuinely country-agnostic, rather than creating de facto exclusions," said a Chinese clean technology manufacturer who requested anonymity.
The mood among Chinese businesses is "cautious and increasingly uncertain, though not alarmist," this person said, adding that they know they are headed for a more defensive EU policy.
The Chinese Chamber of Commerce to the EU (CCCEU) described the decision for a diversification instrument as "regrettable," arguing that rising imports from China reflected choices made by European business and consumers.
"The chamber believes that China-EU trade is driven by market demand and the complementary strengths of our economies," a CCCEU spokesperson told Nikkei Asia, highlighting the role that Chinese machinery and industrial components play in supporting European industry.
The EU recorded a goods trade deficit of 360 billion euros with China in 2025. In April, imports exceeded exports by 31.9 billion euros, according to Eurostat, equivalent to over 1 billion euros a day.
German Chancellor Friedrich Merz appears to be taking a harder line toward China, saying last week that Chinese subsidies and an undervalued currency placed European industry at a "massive competitive disadvantage."
Germany, the EU's largest exporter, has resisted tougher action in the past because of its extensive trade and investment ties with China. Not only is Berlin's flagship auto industry deeply intertwined with China's, its chemicals group BASF and pharmaceuticals major Bayer are among the companies that have huge operations there.
"There is a growing consensus that bolder action is needed," said Noah Barkin, a senior adviser at research and advisory firm Rhodium Group. "There is less of a consensus on what that action should look like."
Despite Merz's tough words, the German government remains divided, he said.
"Berlin does not want safeguards in the near term and is likely to take a dim view of any instrument which forces companies to restructure their supply chains," Barkin said.
A recent report by the German Economic Institute think tank estimated that 400,000 German jobs linked to exports to China may have disappeared since May 2021....
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