MNI INTERVIEW 2: China Willing To Further Open To EU Imports

China could offer to cap production in key sectors such as electric vehicles and to further open its domestic market in order to expand its trade relationship with the European Union, a prominent Chinese economist and government advisor told MNI.

China’s leaders want to partially compensate for U.S. tariffs by boosting trade with the EU, also targeted by President Donald Trump, and will offer to open the door wider to European products, said Li Daokui, director of the Institute for Chinese Economic Practice and Thinking at Tsinghua University, though he noted that deep economic interdependence would make full Chinese decoupling from the U.S. impossible. 

In order to allay EU concerns over unbalanced trade, Beijing could open substantial portions of its domestic market, potentially boosting its imports from the bloc from last year’s EUR213 billion, Li said. A key condition would be further alignment of technical standards, he added, citing phytosanitary standards in particular.

Speaking after a phone call between Premier Li Kiang and European Commission President Ursula von der Leyen on Tuesday, which saw them reaffirm mutual support for economic globalisation and the World Trade Organisation, Li said he expected a reopening of the stalled China-EU Comprehensive Agreement on Investment, leading to a mutual reduction in tariffs. (See MNI: China To Hit Back Against US, Seek Europe Ties - Advisors)

EV CAPS

In response to Brussels’ concerns that excessive Chinese supply could flood markets, Beijing could impose production caps in key sectors such as electric vehicles, rather than agreeing to direct export limits, Li said.

“Production caps will safeguard our trading partners, while also curbing damaging competition at home,” he said, pointing to this year’s government work report, which highlighted the need to address unhealthy competition in some industries.

Li was optimistic that negotiations with Washington would soon resume, noting that Trump had overestimated the impact of tariffs on China’s economy, given that exports to the U.S. accounted for just 2.77% of GDP and that Beijing retained substantial room for fiscal stimulus.

Any market speculation that the People’s Bank of China could devalue the yuan to help exporters absorb tariff pressure is unfounded, Li said. Far from manipulating the currency to make it weaker, as per U.S. accusations, the PBOC is primarily concerned to prevent any sharp yuan depreciation which would encourage capital flight, he said.