China has confirmed its readiness to work with the European Union to enhance the stability of economic and trade relations, in a move that reflects Beijing's desire to contain trade disputes with Europe, days after reaching a new agreement on Chinese hybrid car exports to European markets.
During a meeting in Beijing with Emmanuel Beaune, chief diplomatic advisor to French President Emmanuel Macron, Chinese Deputy Prime Minister He Lifeng said that China is ready to work with the European Union to bring more stability and positive momentum to economic and trade relations between the two sides.
On Wednesday, the official Xinhua News Agency quoted He as saying during the meeting held on Tuesday that the economic relations between China and France have great potential for further growth, stressing Beijing’s readiness to enhance cooperation with Paris in various economic fields.
He added that China wants to work with France to implement the understandings reached by the presidents of the two countries, in a way that achieves common interests and enhances economic cooperation.
These statements come at a sensitive time for trade relations between China and the European Union, after the two parties reached an agreement last week that could lead to reducing Chinese hybrid car exports to the bloc by more than half.
The agreement reflects an attempt to manage tensions associated with the rapid expansion of Chinese cars in European markets, in light of local manufacturers' fears of increasing competition.
The automobile industry is of particular importance in trade relations between the two sides, as Chinese cars, especially electric and hybrid cars, have become one of the most prominent sectors driving the growth of Beijing's industrial exports.
In contrast, the European Union seeks to protect the competitiveness of the European automobile industry, which faces increasing pressures as a result of technological transformation, rising production costs, and external competition.
The Chinese Ministry of Commerce announced, on Monday, that the new agreement with the European Union came after extensive consultations between the two parties, stressing that it will allow the continued growth of Chinese exports within an agreed upon regulatory framework.
The ministry explained that the agreement guarantees China an export quota in line with the quotas granted to other countries, in an attempt to present the understanding as a mechanism to regulate trade instead of closing markets.
From an economic standpoint, the agreement may contribute to reducing the uncertainty facing Chinese auto companies operating in the European market, by providing clearer rules regarding the volume of permitted exports.
But the new restrictions may prompt companies to reconsider their export and investment plans, especially if they reduce their ability to increase their market shares in Europe.
This may encourage some Chinese companies to expand their industrial investments outside China, or increase reliance on local manufacturing within target markets, to reduce their vulnerability to trade restrictions.
France stands out as an important party in this equation, given its position within the European Union and the presence of its companies in the automotive, energy, and advanced industries sectors.
Strengthening the economic dialogue between Beijing and Paris would open the way for broader cooperation in the fields of investment, technology and energy, while disagreements continue over some industrial sectors.
The Chinese Deputy Prime Minister's statements indicate Beijing's desire to separate specific trade disputes from broader economic relations with the European Union, in a way that preserves channels of cooperation and limits the possibility of escalating protectionist measures.
It also reflects an awareness of the importance of the European market for Chinese companies, especially in light of the Chinese economy’s continued reliance on exports to support growth, while domestic demand faces challenges linked to weak consumption and investment.
On the other hand, the stability of trade relations with China represents an economic interest for the European Union, given the intertwining of industrial supply chains and the dependence of many European sectors on Chinese components and products.
However, reaching an understanding on hybrid cars does not necessarily mean the end of trade disputes between the two parties, as issues of industrial competition, market access, and government support remain sensitive issues.
For investors and companies, the executive details of the new agreement will be an important indicator of the extent to which Beijing and Brussels are able to manage differences without harming trade exchange.
The nature of economic cooperation between China and France during the next phase will also determine whether political statements will be transformed into practical steps that support bilateral investment and trade.
In conclusion, Beijing seeks to use dialogue with Paris to enhance the stability of its economic relations with the European Union, at a time when its industrial exports face increasing scrutiny in global markets.
The success of this path depends on the ability of the two parties to achieve a balance between protecting local industries and maintaining trade and investment flows, thus reducing tensions and giving companies a greater degree of certainty.
