In the IOE&IT Daily Update’s latest round-up of trade developments in China, we include a warning about EU-China relations, the news that the Belt and Road Initiative could be about to lose its only major EU economy and signs that South Korea is shifting its trade towards North American shores.
A senior EU official has said he will push Beijing to reduce its barriers to European businesses as the bloc’s trade deficit with China reaches “staggering” levels.
European Commission (EC) trade commissioner Valdis Dombrovskis told the FT that the trade deficit had more than doubled in two years.
The EU’s goods exports to China were €230bn in 2022, while the bloc’s imports from the Asian nation increased to €626bn.
Dombrovskis emphasised dialogue over coercion, adding that maintaining good relations was a priority, but said that the EU would consider stronger action if its issues weren’t addressed.
Lexology notes that in recent years the EC has become more active in equipping itself with ‘anti-coercion’ tools, including an expanded toolkit of laws to defend the EU’s trade interests.
EU member Italy is looking to back out of its “atrocious” decision to become the only major western economy to join China’s Belt and Road initiative (BRI).
Defence minister Guido Crosetto said the country’s exports had not benefitted while China’s export to Italy had soared.
It is now looking to break free of the arrangement without damaging relations, he added.
The decision to join BRI, taken in 2019, will be automatically renewed in March 2024 unless Italy makes a formal request to withdraw from it by December this year, the BBC reports.
Italian prime minister Georgia Meloni briefed US president Joe Biden on her government’s plans during a visit to Washington last week (31 July).
Experts have said that China faces technical hurdles to joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) trade pact.
Reuters reports trade analysts’ warnings that the requirements for joining the CPTPP might be too onerous for the country. These areas of concern included tariffs, opening services and investment markets, competition, IP rights and protections for foreign companies.
Senior figures from within the bloc also indicated that they were in no rush to admit new members.
Speaking as the UK became the first new member to join the 11-country Asia-Pacific group, Australia’s assistant trade minister, Tim Ayres, told the Guardian: “I think consideration of future accession applications is some way off”.
China has taken steps to ease trade tensions with Australia over the past six months, such as resuming imports of timber, coal and stone fruit. However, restrictions still remain on products such as barley, wine, seafood and red meat.
China’s ambassador to New Zealand, Wang Xiaolong, said in a recent speech that joining the pacific trade bloc remained important to Beijing.
South Korea tech companies have started to pivot away from the Chinese economy and towards the US despite warnings from Beijing about the consequences of this.
Korean chip and battery makers – including Samsung, SK, and LG – are looking to take advantage of US investment through the Inflation Reduction Act, but will need to limit their activities in China to do so, the FT reports.
South Korea exported more goods to the US in 2022 than it did to China for the first time since 2004, and the country is looking to escape Beijing’s policy to “arbitrarily interfere with businesses”.
The US has been clamping down on chip manufacturers’ involvement with China as it looks to stop Beijing acquiring cutting edge chip technology.
In return, China has stopped purchasing some US semiconductors and banned the export of minerals important to chip manufacture.
EC president Ursula von der Leyen has slammed Beijing for its “militant” stance in the Indo-Pacific and its failure to support Ukraine during a trip to the Philippines where she announced the relaunch of trade talks between Brussels and Manila.
Pitching for EU investment in the region, she said: “We cannot choose our neighbours, but we can choose who we do business with, and on what terms.”
The EU would not only invest only in the extraction of raw materials, but in building local capacity for processing, powered by new clean energy infrastructure, Politico reports.
The scoping exercise for the agreement is expected to begin “soon”.
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