Demand slump, US trade turbulence vex EU firms in China: lobby paper

BEIJING: China's spending slump is presenting significant hurdles for European firms in the country, a lobby group said Tuesday, as companies also nervously await a meeting of the Chinese and US presidents this week.

Beijing has struggled to reignite domestic consumption since the end of the Covid-19 pandemic, while a prolonged debt crisis in the once-roaring property sector weighs on sentiment.

China has also recorded a historic boom in exports, providing key support for the economy but building huge surpluses that increasingly ruffle feathers abroad – particularly in Brussels.

"The current trajectory is unsustainable," Jens Eskelund, president of the European Union Chamber of Commerce in China, told a news conference ahead of the release of the organisation's annual position paper on Tuesday.

The chamber's paper warned: "Certain structural imbalances that are preventing China's economy from performing to its potential need to be addressed over the long term."

The EU chamber, which represents more than 1,600 member companies, noted that China's share of global container exports increased to 37 percent last year, while its overall trade surplus reached a record high.

"While some of this is a result of global demand for Chinese products, a significant contributor has been the disparity between the rapid increase of manufacturing capacity relative to consumption growth," it said.

China's yawning trade surplus with the European Union this year reached $242 billion through the end of August, Chinese customs data showed this month, larger than its surplus with the United States.

The trend has increased pressure on Brussels to protect European manufacturers from being crowded out by floods of imports from China.

European firms are concerned about heightened trade tensions, especially following the escalation of a tit-for-tat tariff battle between Beijing and Washington last year.

That battle was resolved with a shaky truce in Busan, South Korea, in October.

At that meeting between US President Donald Trump and his Chinese counterpart Xi Jinping in South Korea, Beijing agreed to relax controls on exports of rare earths and related magnets that are vital for the modern economy.

"We will have to wait... to see if we're going to have an extension of the Busan agreement," Eskelund said.

"We are all crossing our fingers," he said, adding that "nothing is a given."

The EU chamber's position paper also said member firms faced bureaucratic challenges in China, including "roadblocks" to relocation efforts within the country and difficulties in obtaining construction permits.

It described such issues as "low-hanging fruit" that could be resolved quickly by Beijing.

Other challenges are more deep-rooted, Eskelund said, noting that he did not see "any sort of sign" that China's lopsided export boom was going to slow down.