China and Europe: Trading for the Future

The European Union is China's largest trading partner, and despite growing protectionism on the mainland, optimism among EU businesses in China remains high, but for how long? While gains by some marquee European companies have strengthened ties between the EU and China, falling exports and rising barriers are causing problems.

Protectionism on the rise

The European Union recently filed a World Trade Organization complaint against China on the grounds that Beijing was unfairly helping domestic makers of steel, aluminum and chemicals by effectively blocking overseas exports of the raw ingredients needed for steel aluminum and chemical products. The complaint alleges that Chinese steel, aluminum and chemical companies are getting first rights on raw materials from domestic producers at super low prices. This is allowing them to compete unfairly against overseas companies who have to buy their raw materials on the open market, which are now arguably at higher prices because the lack of Chinese output is limiting availability of supplies.

The United States filed a similar complaint, saying that there appeared to be a "conscious policy to create unfair preferences for Chinese industries by making raw materials cheaper for China's companies to get, and goods more economical for them to produce."

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