European Commission pressures China over trade imbalance — South China Morning Post
The European Commission is seeking progress from China in addressing the trade imbalance between the EU and China by next month and is considering introducing new protectionist measures. This is stated in a South China Morning Post column devoted to the competitiveness of Chinese industry and trade with other countries.
The author notes that China’s goods trade surplus approached $1.2 trillion last year. The article calls the common explanation of China’s industrial success as being driven by “overcapacity” overly simplistic: China’s advantages are also linked to the scale of its manufacturing ecosystem, intense domestic competition and developed supplier networks.
China’s manufacturing advantage
According to International Energy Agency data cited in the column, manufacturing an electric vehicle in China costs 30% less than in advanced economies. Only about one-third of this difference is attributable to batteries; the cost gap is similar for cars with internal combustion engines.
Rhodium Group, cited by the author, estimates BYD’s advantage over Tesla’s Chinese operations at about $4,700 per vehicle. Direct subsidies account for around $292, while the main share of the difference is linked to vertical integration, lower research, administrative and supplier costs.
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Consumption and cooperation
China has been discussing reorienting its economy toward domestic consumption for two decades. The 2025 action plan to stimulate consumption covered wages, pensions, healthcare, childcare, paid leave and social guarantees for migrant workers and workers in flexible employment.
The government also adopted the first five-year plan specifically dedicated to consumption, targeting retail sales of around 60 trillion yuan by 2030. Last year, per capita disposable income rose by 5%, while consumer spending increased by 4.4%. At the same time, household consumption accounts for about 40% of GDP, while the savings rate in the first quarter of this year was estimated at 32.4%, compared with the pre-pandemic average of 29.6%.
The column’s author proposes that China’s trading partners apply permanent protection only to genuinely strategic vulnerabilities and, in cases of proven harm from a sharp increase in imports, use temporary measures subject to review. Alternatives to broad restrictions include subsidy transparency, common environmental and safety standards, competition rules and agreements on opening markets.
