Europe hopes to manage Chinese exports through voluntary limits, for example on hybrid cars shipped to the bloc, but an EU official said Brussels wants to include other products. Beijing has said it firmly opposes import quotas.
China has limited room for manoeuvre because of weak domestic demand, which means the government relies on exports to sustain growth levels.
DIVERSIFYING SUPPLIERS
Since the bloc does not expect significant changes by China, the EU official, speaking on condition of anonymity, said it was also steaming ahead with preparing new tools.
Several EU nations including France have pushed for a “European equivalent of Section 301” – the trade tool US President Donald Trump used to probe foreign practices Washington deems discriminatory, and retaliate with tariffs.
Responding to reports last week about such a tool, Beijing warned it would “respond resolutely” to “discriminatory restrictive measures”.
The EU knows they are not empty threats: China previously retaliated against the bloc’s trade defence moves with duties on European cognac, and conducted anti-dumping probes into pork and dairy products.
Brussels is also developing a tool that would support businesses, through funding, to diversify their suppliers in critical sectors.
It is still unclear, however, how far the EU as a whole would be willing to go against China – for fear of provoking Beijing.
Germany, which is especially exposed since its biggest trading partner is China, has been especially cautious – though Berlin’s stance has hardened as it worries Chinese overcapacities are hurting its export-led economy.
Europe has “the ability to do something more aggressive to stem this China 2.0 shock”, GMF’s Naas said. “The question is, will they?”