Trade: China signals agreement with EU in dispute over hybrid exports

Beijing, Brussels. China and the EU have apparently reached an agreement to avert an escalation in the trade dispute. "After intensive consultations, both sides reached an understanding on trade in hybrid vehicles in accordance with WTO rules," said a statement carried by state news agency Xinhua on Friday evening local time. A compromise regarding e-car tariffs is also being suggested.

The meeting with He Lifeng is a sign that Beijing is taking European criticism more seriously than before. The vice premier also leads negotiations with the USA and is considered a confidant of state and party leader Xi Jinping. The conversations between Sefcovic and He indicate that the conflict with the Europeans has now been raised to the highest political level.

The EU has long criticized China's growing export surplus and what it sees as unfair competition. Last year, China's export surplus with the EU amounted to almost 360 billion euros, almost 60 billion euros more than in 2024.

At the end of June, Brussels gave Beijing an ultimatum: If there is no rapprochement in the trade conflict by October, it wants to take tougher measures to better protect its market. However, a decision on additional trade barriers is unlikely to be made until the upcoming meeting of EU heads of state and government on October 15th and 16th at the earliest.

At the beginning of the week, Chancellor Friedrich Merz and French President Emmanuel Macron proposed giving the European Commission new, far-reaching powers in order to assert itself in the trade dispute with China. The Handelsblatt had previously reported on the initiative.

The Chinese Europe expert Jian Junbo described the move to the Handelsblatt as “extremely unfriendly and one-sided”. This makes negotiations more complicated and tense, said the director of the Center for Sino-European Relations at Shanghai Fudan University. Europe is harming itself. He described demands that China reduce its exports to Europe as “unrealistic”.

China's central bank on Thursday also rejected allegations that China's currency was undervalued. “China has neither the need nor the intention to gain competitive advantage by devaluing its currency,” it said in a nine-page document. The strength of Chinese exports is due to increasing industrial competitiveness rather than monetary policy.

There is repeated criticism from the EU that the Chinese currency, the yuan, is severely undervalued, thereby giving Chinese exporters an advantage on global markets. Chancellor Merz has repeatedly accused China of keeping its currency artificially weak. He put the undervaluation at 25 to 30 percent. Since the beginning of the year, the euro has depreciated by more than eight percent against the yuan. A comparison with the dollar suggests that this is due to both the weakness of the euro and an appreciation of the yuan.