Reshape the Sino-EU Trade and Economic Relations Under Rising Uncertainty

China and the EU play their roles as cornerstones to support the global economic order.

In terms of economic size, the EU and China are the world’s second and third largest economies respectively. According to data from International Monetary Fund, EU’s GDP reached US$19.4 trillion in 2024, and China had its GDP of US$18.7 trillion that year, combinedly accounting for more than one-third (34.5%) of the global economy.

In terms of trade scale, China and the EU are the world’s first and second largest trading partners in goods trade respectively. According to data from World Trade Organization, China had its trade volume of goods at US$6.2 trillion and the EU’s trade volume in goods was US$5.4 trillion in 2024, combinedly taking up nearly 30% (28.6%) of the world’s total trade in goods. In terms of trade in services, the EU and China are the world’s first and third largest trading partners respectively. In 2024, the scale of trade in services for the EU reached US$3.1 trillion and US$1.1 trillion for China, jointly accounting for more than 30% (30.4%) of the world’s total trade in services.

Currently, China is a middle-income country with a per capita GDP of $12,600. As of the end of 2024, the total number of middle-income people reached 420 million and is expected to grow to 550 million by 2030. While 27 EU members are all high-income countries, among which Bulgaria has the lowest per capita GDP, reaching $16,000 and Luxembourg has the highest per capita GDP, reaching $129,000. The population reached 450 million in 2024, an increase of 0.4% from 2023. Therefore, in terms of economic size, market size and consumption potential, China and the EU are both important entities that would determine global economic governance. Cooperation between the two sides is not only a huge opportunity for each other’s economic development, but also a key driving force in promoting inclusive growth of the global economy.

China-EU economic and trade relations are facing huge challenges.

The COVID-19 pandemic, the conflict between Russia and Ukraine, and the US reciprocal tariffs have brought in continuous ramifications to China-EU economic and trade relations, resulting in the deep reconstruction of China-EU economic and trade relations in recent years.

Global trade confronting growing uncertainty. The US’s implementation of 10% sweeping reciprocal tariff on all trading partners has become the biggest uncertainty the global trade confronts. China and the EU are the top two trading players in global trade, with their own trade value (including trade in goods and trade in services) accounting for 39% and 45% of their respective economies. The abuse of tariffs by the United States undoubtedly has significantly adverse impacts on China and the EU, whose economic growth highly depends on the international market. The World Trade Organization’s forecast in April 2025 pointed out that global trade flow is expected to drop by 0.2% in 2025, which is nearly three percentage points lower than it would have been without recent trade policy shift. If currently suspended reciprocal tariffs are restored after July 9 and a broader spillover caused by uncertainty of trade policies spreads, global trade flows exposed to the above uncertainties may decline by 1.5% in 2025.

China-EU economic and trade relations increasingly affected by non-economic factors. At present, factors such as political correctness, security considerations and technological competition have begun to affect the EU’s economic and trade policies toward China. Under the combined influence of the above factors, the EU’s exports to China have been greatly disrupted in recent years, including export controls on high-tech products like chips, export decline of chemical and energy products to China due to competitiveness disadvantage exposure to rising energy costs. In addition, with implications of “de-risking” policy towards China increasing, the EU has strengthened its protection of the internal market and used its trade defense tools, like Foreign Direct Investment Screening, Foreign Subsidy Regulations, International Procurement Instrument to restrict Chinese companies from operating in Europe, which have great impacts on Chinese trade with and investment in Europe.

A big mismatch between China and the EU’s stance toward each other’s relations. At the beginning of this century, the EU’s stance toward its relations with China was a comprehensive strategic partnership, while in 2019 which changed to a tripartite stance-partner for cooperation, economic competitor and systemic rival, and then towards “de-risking” policy since 2023, especially in the fields of critical raw materials and sensitive technologies like semi-conductor, biotechnology, artificial intelligence and quantum technology. On the other hand, China’s stance toward its relations with EU emphasizes four major partnerships for peace, growth, reform and civilization, and then three major forces – two great powers that promote multi-polarization, two major markets that support globalization, and two major civilizations that advocate diversity. The difference in mutual stance toward each other has also led to increasingly obvious differences in the cognition of the two sides on economic and trade issues. The China-EU economic and trade relations are moving away from the nearly 50-year partnership based on the perspective of “globalization”.

Reshape China-EU economic and trade relations for the prospect.

This year marks the 50th anniversary of the establishment of China-EU diplomatic relations. Over the past 50 years, China-EU economic and trade relations have made great progress, and the relationship between the two sides as mutual important economic and trade partners has been continuously consolidated. Between 1975 and 2024, the import and export volume of China-EU goods trade increased from US$2.4 billion to US$785.8 billion, and China-EU two-way investment totaled US$260 billion, with China’s average annual direct investment into the EU in the past five years reached about US$7.6 billion, which has been equivalent with the annual level of the EU’s direct investment into China.

Looking to the future, the prospects for China-EU economic and trade relations are still promising if the two sides move towards each other in the following three aspects as follows:

First, highlight partnership positioning. China and the EU and its member states should strengthen strategic communication and partnership at all levels to make up diverges between China and the EU on their relationship. Encourage and support think-tanks, enterprises, civilians, media on both sides to increase two-way exchanges and build up mutual trusts for China-EU cooperation. Reduce adverse effects of the EU’s “de-risking” toward China on China-EU economic and trade relations.

Second, strengthen multilateral guidance and coordination. China and Europe are both beneficiaries and steady defenders for economic globalization and trade liberalization. Both sides should jointly maintain the WTO centered and rule-based multilateral trading system, accelerate the WTO reform, work together to address global challenges such as climate change and promote inclusive economic globalization, rather than simply cooperate with like-minded countries to develop economic and trade relations.

Third, explore new models for green cooperation. China and Europe should encourage localized cooperation in trade and investment, promote the integration of mutual enterprises into each other’s production and supply chain layout, open markets and create a fair and just business environment, allow enterprises to deepen their presence in each other’s markets, participate equally in each other’s market procurement and operations, and encourage enterprises from both sides to jointly carry out technology research and development, talent training, logistics and supply chain resilience cultivation, and etc.