Trade row rumbles on as ‘new China shock’ hits the EU
Idealogical chasm is part of the problem amid Beijing’s state-funded policies in high-tech industries
Trade tensions are escalating between China and the European Union. In part, this is due to an idealogical chasm that has split the world’s largest exporter from the world’s largest trading bloc. Or, autocracy against democracy.
The spillover is at the heart of a rift that runs deep in trade relations. It prompted the EU and its 27-member states to refuse to hold economic talks with Beijing this week ahead of a planned leaders summit next month.
Ursula von der Leyen, the president of the European Commission, did not mince her words at the G7 gathering in Canada this week, warning of a “new China shock.”
“We [have] all witnessed the cost and consequences of China’s coercion through export restrictions,” von der Leyen said as reported by Euronews.
“[Now,] China is using [the] quasi-monopoly [of rare earth minerals] not only as a bargaining chip, but also weaponizing it to undermine competitors,” she stressed.
Bullying and blackmail:
- A Beijing ban would be devastating for European automakers, aerospace groups, semiconductor companies, and military contractors.
- China’s chokehold on the essence of modern technology would also cripple global supply chains. A wakeup call for an “alarmed” Brussels amid a tariffs standoff with Washington.
The Chinese Communist Party controls everything in society.
Chenggang Xu, of the Stanford Center on China’s Economic and Institutions
Delve deeper: Last month, the Mercator Institute for China Studies in Berlin underlined the dangers facing the EU. MERICS highlighted Beijing’s state-backed policy of “overcapacity” in sectors such as electric vehicles, which are flooding overseas markets.
Between the lines: “China now accounts for roughly one third of global value-added manufacturing … its trade surplus hit nearly US$1 trillion last year. The resulting glut [is] driving down prices globally as more [of its exports] enter [world] markets,” MERICS said.
Bottom line: “China’s overcapacity issue is troubling not because [it] is a net exporter, but because it is exporting market distortions that warp prices in market economies on an unsustainable scale,” MERICS added, driving out domestic competitors.
Big picture: Still, this state-funded strategy simply illustrates how “the Chinese Communist Party controls everything in society,” according to Chenggang Xu, of the Stanford Center on China’s Economic and Institutions.
Why it matters: “The CCP has itself proclaimed that the Party leads everything, which is the definition of totalitarianism,” he told The Wire China.
China Factor comment: From manufacturing prowess to military power, Beijing has one goal – global dominance. And the destruction of the democratic world order.