On June 12, Chinese Premier Li Qiang held a meeting with the president of the European Central Bank, Christine Lagarde, at the Great Hall of the People in Beijing. According to the Chinese media, Li called for closer cooperation between the EU and China amid growing global economic challenges. In describing their talks, Chinese Foreign Ministry Spokesperson Lin Jian posted on X, “In the face of headwinds in economic globalization, only cooperation can lead to win-win outcomes. As two major economies and two major forces, China and the EU should enhance multilateral coordination, promote opening up and cooperation, and make greater contributions to promoting the recovery of the global economy and improving global governance.”
A day before her meeting with China’s premier, Lagarde visited the People’s Bank of China (PBOC) where she, along with bank Governor Pan Gongsheng, signed a memorandum of understanding on cooperation in the field of central banking. The MoU updates the previous MoU signed between the two institutions in 2008 and includes a framework for regular dialogue, technical cooperation, and exchange of information between the ECB and PBOC. “It is important that we sustain global cooperation,” Lagarde said, calling the MoU “a sign of our continued dialogue with the People’s Bank of China.”
Lagarde’s visit to China came as both Europe and China marked the 50th anniversary of the establishment of diplomatic relations between the EU and China. But the celebrations couldn’t quite mask growing mistrust between the two. Bilateral relations between the two are moving forward on different trajectories in different sectors, ranging from cooperation to competition, which gives rise to the growing tensions between the two. The EU sees China as a cooperating partner as well as an economic competitor and a systematic rival. The Union claims to balance its geoeconomic and geopolitical interests with its values ranging from democracy to human rights and the rule of law in its engagement with Beijing.
Despite growing mistrust in their relations and growing competition, China and the EU are each other’s strategic markets for goods and services with an average trade of approximately $1.5 billion on a daily basis. That makes China the EU’s second-largest trading partner after the United States. During the last decade, China’s share of EU trade has increased from 12 percent in 2014 to 15 percent in 2024. China is the EU’s most important source of imported goods, providing 21 percent of EU imports (the U.S., in second, accounts for 14 percent). However, the EU faces a trade deficit with China. In 2024, the trade deficit amounted to $305 billion; it had set a record of $396 billion in 2022. Despite the decrease since then, the trade deficit between the two seems set to stay for the foreseeable future looking at the import-export trends of the last 10 years. The EU’s imports from China increased by 101.9 percent between 2014 and 2024, while exports during this time grew by a more modest 47 percent.
If you ask European officials, the trade imbalance between the EU and China is attributed to China’s alleged lack of market openness. According to the European Commission, which is the executive body of the EU, China’s market has traditionally been less open to foreign investment compared to EU markets. EU firms do not benefit from the same levels of fair competition and transparency in China as Chinese firms do in the EU market. To address this imbalance, the EU and China reached an agreement in principle on a Comprehensive Agreement on Investment (CAI) in late December 2020. Under the CAI, Beijing agreed to provide European investors with greater access to its markets, including new market openings. However, the agreement met opposition from the EU member states due to China’s alleged violation of human rights, forced labor, and a different political system. Thus, a few months after the agreement, the European parliament effectively suspended the ratification process, and it has been stalled ever since.
In October of last year, EU member states approved tariffs on Chinese electric vehicles (EVs) to address the trade imbalance and protect the domestic EV industry, despite the “no” vote from Germany – the biggest automaker within the EU. The EU thus increased tariffs on the Chinese-built EVs to as much as 45 percent. This decision was a result of an unprecedented rise in imports of EVs into Europe from China, which, according to a thorough investigation by the European Commission, enjoyed an unfair advantage due to extensive state support. This move marked a significant shift in the EU’s relationship with Beijing. China followed suit by starting trade investigations on some of the products coming from the EU, including brandy, pork, and dairy.
In April, both decided to explore setting minimum prices on the EVs coming from China, which could ease the tensions between the two. However, this might not come to fruition due to new steps taken by the EU earlier this month in retaliation for Beijing’s “Buy China” policy, which restricts access for EU companies to Chinese government contracts. The EU has taken measures to limit Chinese medical devices’ access to its public procurement market. These tit-for-tat measures might delay the normalization of the ties between the two.
However, U.S. tariffs against both might still bring China and the EU closer and help motivate the two to resolve their issues. The growing U.S. trade tensions with both the EU and China offer Brussels and Beijing an opportunity to cooperate and work toward reforming the global financial system in a way that could benefit both.
During the meeting with Lagarde, Li told her that Beijing was ready to strengthen cooperation with the ECB, including on the reforms concerning the international monetary system. Lagarde in her speech at the PBOC said that “coercive trade policies” risked harming supply chains and the global economy. She further said that “even in the face of geopolitical differences” all parties must find solutions. She added, “Coercive trade policies are far more likely to provoke retaliation and lead to outcomes that are mutually damaging” for all the countries.
Thus, both parties share goals aligned against Trump’s tariff gamble, which could be a blessing in disguise, allowing them to strengthen relations amid the global trade war.
In the second half of July, China and the EU will gather in Beijing for a landmark China-EU summit, celebrating 50 years of diplomatic relations that began in 1975. This summit presents a pivotal opportunity for China-EU relations, which, despite current frictions, have the potential to stabilize and grow stronger. By bringing attention to collaboration, the summit can effectively overshadow ongoing conflicts and convey a powerful message to Trump, whose policies in the five months of his second term have only contributed to global chaos. Now is the time for China and the EU to seize this moment and strategically align their interests for a more cooperative future in their bilateral relations.