Media: China's export surge is the main drag on European economic growth, not trade deficit

Goldman Sachs revealed in a latest survey on July 2 that the primary obstacle to European economic growth is not the trade deficit with China, but rather the loss of market share to Chinese products in other countries. The EU is striving to strike a balance between avoiding a trade war and adopting more defensive trade policies to ensure a fair competitive environment for European businesses.

Goldman Sachs, a U.S.-based multinational investment group, said in its report Thursday that the main barrier to EU economic growth is not the expanding trade deficit with China, but rather the greater impact of Chinese exports on Europe’s economy—far exceeding the effects of the trade imbalance. The investment bank also noted that the EU’s current response measures fall short compared to the comprehensive tariff actions taken by the United States.

Analysis indicates that Chinese manufacturers are increasingly entering global markets, intensifying competition for the EU in Asia-Pacific, Latin America, and Eastern Europe. Recently, the European Central Bank has downgraded its growth forecast for the remainder of this year.

The Wall Street brokerage Goldman Sachs stated: “We believe it is China’s export-oriented economic model—not the bilateral trade deficit between China and the EU—that is primarily dragging down European economic growth. The competition mainly comes from third-country markets.”

China’s exports to the EU continue to rise

China’s exports to the EU grew by approximately 16% in the first five months of this year, while EU exports to China increased by less than 10%. The sectors most affected are European manufacturing, particularly transportation equipment and industrial machinery—industries where Chinese products’ low-cost advantages are most evident.

Specifically, the share of European goods in global exports has declined to 43%, down from 54% in 2005; during the same period, China’s share rose from 7% to 24%, with Chinese machinery exports to Europe increasing by 50%.

Goldman Sachs expects the EU will abandon its currently lenient trade policy toward China and shift toward stronger, more targeted trade measures. However, the EU is unlikely to adopt “American-style” comprehensive tariffs, as it does not want to jeopardize its own imports of critical materials such as rare earths.

Analysts suggest that initial EU countermeasures will focus on the most obvious sectors, such as steel, machinery, and chemical products, where supply chain shifts are most apparent.

Strained EU-China trade relations

Recently, Weber, chairman of the powerful conservative People’s Party Group in the European Parliament, said in an interview that if the EU fails to reach an agreement with China before autumn to reduce the ever-widening trade deficit, the bloc will enter a “conflict phase” with Beijing.

Weber stated: “We need to fundamentally rethink Europe’s policy toward China. We need a level playing field.” He clearly indicated that government subsidies are unacceptable in a free market economy.

This week, EU Trade Commissioner Shevchenko said Brussels aims to reach an agreement with China before October to correct trade imbalances.

Concerns about China’s industrial overcapacity are growing, further weakening Europe’s manufacturing sector. Brussels is preparing new trade defense tools to address the so-called ‘China 2.0 shock’.

Currently, the EU is demanding concrete actions from China. When asked what would happen if the trade imbalance remains uncorrected by October, the European conservative leader replied that the EU would enter a “conflict phase” with China.

The EU is attempting to balance avoiding a trade war with adopting more defensive trade policies to ensure a fair competitive environment for European enterprises.

To better protect the European single market, EU leaders have requested Commission President von der Leyen to review existing EU trade defense mechanisms and consider developing new responses.

At the May EU summit, EU leaders avoided explicitly mentioning China, which was interpreted as reflecting divisions over how to handle relations with Beijing. Spain’s Prime Minister Sanchez, who has visited Beijing multiple times over the past two years, advocates treating China as a partner; France, by contrast, pushes for strengthening “European prioritization” in strategic areas. Germany, as the EU’s largest economy and major industrial hub, is widely seen as the key country determining how strongly the EU is prepared to take a tougher stance toward Beijing.

Source: rfi

Original: toutiao.com/article/1869759975327754/

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