随着中美贸易的不断发展，美对华贸易逆差水平呈总体呈扩大趋势；而同时期，中欧

贸易也在不断发展，但欧对华贸易逆差水平较小且保持稳定，请分析原因。

Almost 60 per cent of EU exports consist of machinery and transport equipment (generally
considered as high- or medium-technology commodities). In turn, just half of Chinese
exports to the EU fall into the same category. It is interesting to call attention to the fact
that Chinese exports of machinery in the amount of Euro 146 bn corresponds to total EU
exports to China (Euro 144 bn in 2012). Agricultural goods, raw materials and energy,
traditional export items of less developed countries, play a marginal role, but, particularly in
the field of agriculture, point to large unused potential as well. In all smaller commodity
categories (food, raw materials, energy, chemicals) the EU has surplus, while in the other
two dominant categories (different manufactured goods and machinery) we can find a huge
Chinese surplus. Concerning the ‘small’ items, one remark has to be made on EU exports of
raw materials to China. Although the amount is not significant, the fact that the EU is partly
covering Chinese demand in raw materials, while China is partly protecting its raw materials
(see the rare earth problem in the next chapter) is telling.

The European Union and China are two of the biggest traders in the world. China is now the
EU's second-biggest trading partner behind the United States and the EU is China's biggest
trading partner.

 China is the EU's biggest source of imports and its second-biggest export market.
China and Europe trade on average over €1 billion a day
 EU’s main imports from China are industrial and consumer goods, machinery and
equipment, and footwear and clothing
 EU main exports to China are: machinery and equipment, motor vehicles, aircraft,
and chemicals
 EU-China trade in services amounts to more than 10% of total trade in goods, and
the EU's exports of services make up 19% of EU's total exports of goods

EU and U.S. merchandise imports from China are at similar levels and have similar
composition. The EU exports more merchandise goods to China compared to the United
States (and so the EU merchandise trade deficit with China is smaller than the U.S.
merchandise trade deficit with China). The EU exports a similar amount of services
to China as the United States does, but imports more services from China than the United
States does.

As shown in figures 1-3, China runs a merchandise trade surplus with the EU, as it does with
the United States. However, the Chinese merchandise trade surplus with the EU is currently
about half that with the United States, and it has not grown since 2008.

The value of EU merchandise exports to China is double U.S. merchandise exports to China.
While U.S. and EU merchandise imports from China follow similar trends, U.S. merchandise
imports from China exceed EU merchandise imports from China.
The largest categories of EU and U.S. merchandise imports from China are very similar, and
are led by electrical machinery, machinery, furniture/ bedding, toys/games, and apparel.
The top EU and U.S. merchandise exports to China, by 2-digit HS code, are shown in the
tabulation on the next page. Other top U.S. exports to China that were not tabulated (since
they are more prominent in U.S. trade with China) include mineral fuel, plastics, oil seeds
(mostly soybeans), and wood products. Regarding the EU’s top exports to China, in HS 84
(machinery), the EU exports a wide variety of products to China, many of which are inputs
or capital equipment useful in the production of other goods. In HS 87 (automotive
vehicles), it is likely most EU exports to China are luxury, and not massmarket, vehicles.1

The economic relationship between China and the European Union is already extensive.
While the EU is China’s largest trading partner, China is the EU’s second largest after the
United States, and is catching up rapidly.

Currently, China is the EU’s second largest export market behind the US. China’s exports to
the EU have grown even more rapidly and the EU is now China’s largest trading partner and
the second largest export market for Chinese goods5 . Since 2002, the EU’s trade deficit
with China has grown to $220 billion (Figure 6), equivalent to about 1 percent of the EU’s
GDP6 . The widening of the bilateral trade deficit reflects a base effect: it has happened
despite the EU’s exports to China growing more rapidly than China’s exports to the EU.
Meanwhile, the EU’s overall trade balance with the world has moved well into positive
territory, while China’s has moved from overall surplus to balance.

As for any pair of trading partners, the trade relationship between China and the EU is best
understood in a general equilibrium context, rather than from a narrow bilateral
perspective. The essential point is that even if China does not buy as much from the EU as it
sells to the EU, the EU runs an overall trade surplus, and this is made possible to some
extent by the EU’s exports to third parties which have, in turn, seen their exports to China
surge. In fact, China is now the largest export destination for 33 countries out of 186 for
which data is available (McKinsey, 2019). Thus, from 2002 to 2017, the EU’s trade deficit
with China grew on average by about 9 percent annually, but the EU’s trade balance with all
countries excluding China grew on average by about 23 percent annually. The changing
composition of trade between China and the EU reflects the economic transformation China
has undergone since the beginning of the millennium. As China has moved up the value
chain, the share of machinery and electrical equipment imported by the EU that comes from
China has grown:

from below 40 percent to over 50 percent between 2002 and 2018 (Figure 7). More broadly,
capital goods have overtaken consumer products as the main category that the EU imports
from China, accounting for half of total EU imports from China in 2018.

Meanwhile, the share of the EU’s exports to China that consists of machinery and electronic
equipment declined significantly, from above 50 percent in 2002 to 30 percent in 2018,
while China’s imports of EU transport equipment, including vehicles and aeroplanes, and of
chemical products, gained ground steadily. In terms of broad categories, the share of capital
goods in the EU’s exports to China declined by around 15 percent, whereas the portion of
consumer goods increased by roughly the same proportion, in line with Chinese rebalancing.
Based on analysis by CEPII (2019)7 , between 2007 and 2017, China’s revealed comparative
advantage increased sharply in telecommunications equipment, electrical apparatus and
yarn fabrics, but declined in miscellaneous manufacturing, knitwear and clothing.
Meanwhile, China’s revealed comparative disadvantage (sectors where China ran a trade
deficit) increased in travel services, transport, edible agricultural products (except cereals)
and non-monetary gold.

Only Germany and Sweden have a trade surplus in goods with China at time of writing. In
fact, in 2017, 44 percent of EU exports to China originated from Germany, almost as much
as the next nine countries put together. The share of Germany’s gross exports of
merchandise to China, expressed as a share of Germany’s GDP, amounts to 2.5 percent. This
share is a little smaller than Japan’s and three times larger than those of most EU countries
and of the United States.

China’s top exports to the European Union are telecommunications equipment, computer
parts, baby carriages, electrical machinery, apparel and footwear. The inflow of these
products from China has undoubtedly expanded the range available to EU consumers, while
large quantities of intermediate goods or inputs have also been supplied at low prices,
improving the productivity and international competitiveness of EU industries.

The trade deficit with China is focused on office and telecom equipment, textiles and iron
and steel. The trade deficit reflects a huge shift within the economies of Asia to focus
production in China. Although imports from China have surged, Asia’s share of total EU
imports has increased only moderately, by 10% over the last decade. However, the deficit
still reflects the considerable problems EU businesses have accessing the Chinese market.
China is the most frequent location of anti dumping investigations by the EU. The EU
currently has 50 antidumping measures in force against Chinese imports in order to correct
unfair trading practices. However, these affect only about 1% of Chinese imports to the EU.
In 2009, there have only been four new anti-dumping investigations started regarding
Chinese imports.

EU and China in world trade in goods

Figure 1 shows the world largest traders. China (EUR 2 004 billion, 16 %) was the largest
exporter in the world, followed by the EU (EUR 1 879 billion, 15 %), the United States (EUR 1
368 billion, 11 %), Japan (EUR 618 billion, 5 %) and South Korea (EUR 508 billion, 4 %). China
(EUR 1 632 billion, 13 %) was the third largest importer in the world, preceded by the United
States (EUR 2 131 billion, 17 %) and the EU (EUR 1 857 billion, 15 %) and followed by Japan
(EUR 594 billion, 5 %) and Hong Kong (EUR 522 billion, 4 %).

Both exports to and imports from China rose between 2008 and 2018
Figure 3 shows the position of China among the largest trade partners of the EU. China (11
%) was the second largest partner for EU exports of goods. It was preceded by the United
States (21 %) and followed by Switzerland (8 %), Russia (4 %) and Turkey (4 %). It was the
largest partner for EU imports of goods (20 %), followed by the United States (13 %), Russia
(8 %), Switzerland (6 %) and Norway (4 %).
Figure 3: The position of China among the EU-28's main partners for trade in goods, 2018
Source: Eurostat (ext_lt_maineu)
Figure 4 shows exports, imports and trade balance between the EU and China. In 2008 the
EU had a trade deficit with China of EUR 171 billion. This remained a deficit throughout the
whole period, reaching EUR 185 billion in 2018. EU exports to China were highest in 2018
(EUR 210 billion) and lowest in 2008 (EUR 78 billion). EU imports from China were highest in
2018 (EUR 395 billion) and lowest in 2009 (EUR 215 billion).

Figure 4: Imports, exports and balance for trade in goods between the EU-28 and China,
2008-2018 (EUR billion)
source: Eurostat (ext_lt_maineu)

EU-China trade by type of goods

Figure 5 shows the breakdown of EU trade with China by SITC groups. The red colours
denote the primary products: food & drink, raw materials and energy, while the blue colours
show the manufactured goods: chemicals, machinery & vehicles and other manufactured
goods. Finally, other goods are shown in green. In 2018, EU exports of manufactured goods
(84 %) had a higher share than primary goods (12 %). The most exported manufactured
goods were machinery & vehicles (53 %), followed by other manufactured products (18 %)
and chemicals (13 %). In 2018, EU imports of manufactured goods (97 %) also had a higher
share than primary goods (2 %). The most imported manufactured goods were machinery &
vehicles (53 %), followed by other manufactured products (39 %) and chemicals (5 %).

Figure 5: EU-28 exports to and imports from China by product group, 2008 and 2018 (EUR
billion)
source: Eurostat DS-018995

Figure 6 shows the evolution of EU imports and exports by SITC group since 2008. In 2018,
the EU had trade surpluses in raw materials (EUR 6.9 billion), other products (EUR 6.0
billion), chemicals (EUR 5.4 billion), energy (EUR 5.3 billion) and food & drink (EUR 4.5
billion). The EU had trade deficits in machinery & vehicles (EUR 97.4 billion) and other
manufactured products (EUR 115.5 billion).

EU-China most traded goods

Another interesting way to look at the data is to investigate the cover ratio (exports /
imports) of traded goods, showing the direction of the trade flows between the two
economies. These ratios can be found in the right-hand margin of Figure 7. Twelve products
have ratios below 50, indicating EU imports from China are at least twice a large as EU
exports to China. Six products have ratios above 200, indicating EU exports to China are at
least twice as large as EU imports from China. Two products have ratios between 50 and
200, showing more balanced trade.
Trade with China by Member State
Figure 8a shows the EU imports from China by Member State. The three largest importers
from China in the EU were the Netherlands (EUR 85 280 million), Germany (EUR 75 467
million) and the United Kingdom (EUR 53 320 million). Czechia (36 %) held the highest share
for China in its total extra-EU imports.

Figure 8a: EU-28 imports of goods from China by Member State, 2018
source: Eurostat DS-018995

Figure 8b shows the EU exports to China by Member State. The three largest exporters to
China in the EU were Germany (EUR 93 715 million), the United Kingdom (EUR 23 365
million) and France (EUR 20 850 million). Germany (17 %) held the highest share for China in
its total extra-EU exports.

Figure 8b: EU-28 exports of goods to China by Member State, 2018

source: Eurostat DS-018995

Figure 8c shows the trade balance between the EU Member States and China. Three
Member States had a trade surplus with China. The largest was held by Germany (EUR 18
248 million), followed by Finland (EUR 1 448 million) and Ireland (EUR 1 013 million).
Twenty-five Member States had a trade deficit with China. The largest was held by the
Netherlands (EUR 74 157 million), followed by the United Kingdom (EUR 29 955 million) and
Italy (EUR 17 611 million).

In conjunction with moves by individual Chinese companies, yuan weakness versus the euro
is making Chinese products cheaper than their main competition in South Korea, Taiwan,
Singapore and Japan. China exports to Europe are gaining, while the aforementioned
foursome is watching their exports to Europe collapse.

Even before the trade war, China has made it a policy to manufacture more high-end
equipment at home, rather than import it from the heavy machinery, high-tech hubs of
Europe.

The uppermost factor leading to the sharp imbalance in China-EU trade was readjustment of
the global value chain resulting from China's accession to the WTO. This readjustment of the
global value chain resulting from China's accession to the WTO. This readjustment is
embodied in the following two aspects.

First, East Asian economies shifted their large-scale production capacity to the Chinese
Mainland. Against the background of globalization, with the impact from China's labor cost
advantage and its capability for attracting foreign investments, massive processing trade
entered the Chinese Mainland from East Asian countries and territories including Japan,
South Korea, Taiwan (China), etc. resulting in an explosive growth of China's exports after
China's accession to the WTO. Originally, commodities were directly exported to the EU and
the USA from these East Asian countries and territories, but after China's entry into the
WTO, semi-manufactured products and parts were exported from these countries and
territories to China and then exported to the EU and the USA after being processed and
assembled in China.

Second, European and American manufacturers imported semi-manufactured products

from the Chinese Mainland, made them into manufactured products in the EU and then
exported them. Two-thirds of the commodities imported from China by the EU were semi-
manufactured products, which helped European enterprises cut production costs and
enhanced the competitiveness of the EU's export products. Enrupean enterprises enjoyed
opportunities from the vast Chinese market through investments in China. Investments
made by European enterprises in China were mainly represented by horizontal investments,
with investments replacing trade. On the other hand, foreign investments enabled
technology spillover to improve the competiveness of Chinese products and promote
China's exports to the EU; meanwhile, large-scale import of semi-manufactured products
and components made in Cina contributed to boosting the competitiveness of the EU's
export products and thus propelled the EU's exports; on the other hand, as more and more
EU enterprises made investments in China, their commodities were sold on the Chinese
market and replaced the EU's exports to Chian, thus worsening the china-EU trade disparity.
Some studies have proved the the EU's direct investments in China constituted on of the
causes for expanding China's trade surplus with the EU.

Nearly 1/3 of China's exports to the WU was a contribution from imports, while more than
half of China's imports from the EU was re-exported. This fully reveals defects in traditional
trade statistics within the global value chain environment.

The changing composition of trade between China and the EU reflects the economic
transformation China has undergone since the beginning of the millennium. As China has
moved up the value chain, the share of machinery and electrical equipment imported by the
EU that comes from China has grown:

from below 40 percent to over 50 percent between 2002 and 2018 (Figure 7). More broadly,
capital goods have overtaken consumer products as the main category that the EU imports
from China, accounting for half of total EU imports from China in 2018.

Meanwhile, the share of the EU’s exports to China that consists of machinery and electronic
equipment declined significantly, from above 50 percent in 2002 to 30 percent in 2018,
while China’s imports of EU transport equipment, including vehicles and aeroplanes, and of
chemical products, gained ground steadily. In terms of broad categories, the share of capital
goods in the EU’s exports to China declined by around 15 percent, whereas the portion of
consumer goods increased by roughly the same proportion, in line with Chinese rebalancing.
Based on analysis by CEPII (2019)7 , between 2007 and 2017, China’s revealed comparative
advantage increased sharply in telecommunications equipment, electrical apparatus and
yarn fabrics, but declined in miscellaneous manufacturing, knitwear and clothing.
Meanwhile, China’s revealed comparative disadvantage (sectors where China ran a trade
deficit) increased in travel services, transport, edible agricultural products (except cereals)
and non-monetary gold.
China’s export comprises a larger share of manufactured goods than import, which includes
more of the price-volatile natural resources and agriculture)

 But the Chinese economy is moving from lowcost, labour-
intensive manufacturing to goods that require more capital
and technology. In 2006, almost half of Chinese exports consisted of
machinery, equipment and cars. China still makes 70 per cent of the world’s toys and two-
thirds of its shoes. But it also accounts for more than two-
thirds of global production of microwave ovens and
DVD players, half of all personal computers and more than a third
of mobile telephones and televisions. 
Chinese Saving Rate

In the 2000s, WTO entry led to an export-oriented growth surge, with a significant rise in
corporate savings, partly owing to an undervalued exchange rate.
 High national savings today mostly emanate from the household sector. Corporate
savings used to be the main driver in the early 2000s, partly reflecting an
undervalued exchange rate, but have now gradually converged to the global
average.
 High and rising household savings mainly resulted from the one-child policy-induced
demographic changes and the breakdown of the social safety net during the
transition from a planned to a market economy. Housing reform and rising income
inequality also contributed to the increase in savings.

The second stage was in the 1990s, after Deng’s southern tour reaffirmed China’s policy to
reform and open-up. SOE reform took centerstage and was accompanied by the breakdown
of the social safety net, leading to savings rising further to 25 percent of disposable income.

The third stage was after China’s WTO entry in 2001, when savings rose further to 30
percent of disposable income amid an export-driven boom. Notably, since 2010, household
savings have plateaued and gradually started to decline.

First, the economic reform in China that started in 1978 increased income uncertainty
because many jobs were no longer government paid: People save more because they are
more uncertain about their future.
Second, since 1978 the Chinese government has gradually shifted the burden of retirement
income to households. Hence, increased savings are needed for retirement, which formerly
was essentially free.
This change further increased the already high personal saving rate.
Third, China’s financial market and banking system is still underdeveloped and only recently
began to reform. As a result, borrowing for housing, education, medical care, and other big
expenses is very difficult.

(IMF)
_____________________
Entrepreneurship
1. One of the most conspicuous characteristics of Chinese economic transition is
entrepreneurship. There are very deep cultural roots of entrepreneurship in China,
although historically, private entrepreneurship always experienced strained relations
with the government and its representatives. Traditional Chinese popular culture assigns a
primordial social role to money even in religious contexts. Accumulation of wealth is one
of the pathways for securing the family line. Chinese networks 关系 systematically
create a higher level of mutual trust as compared to, for example, Russian networks.

(PDF) Culture, Economic Style and the Nature of the Chinese Economic System. Available
from:
https://www.researchgate.net/publication/5080017_Culture_Economic_Style_and_the_Nat
ure_of_the_Chinese_Economic_System [accessed Dec 29 2019].

2. Traditional Confucian culture stigmatized profit-making and entrepreneurship.

https://www.jstor.org/stable/2111786?read-now=1&refreqid=excelsior
%3A04a2c007b1b2ea879fe59b33ffd176b8&seq=2#page_scan_tab_contents

____________________
Confucian values

State and society are emphasized above the individual. There is a long history of submitting
personal ambition to that of the community and state through Confucianism. The degree of
control and authoritarian structures are more accepted in China than in most western
cultures with their emphasis on individualism.

https://www.tutor2u.net/geography/reference/factors-explaining-the-rapid-economic-
growth-of-china-in-recent-decades

Structural reforms: The fact that the State had traditionally formulated strategic
development policies and been a major presence in all aspects of the country's economic
and social life made it possible to implement the reforms in a disciplined manner.

The first great reform took place at the end of the 1970s with the "quasi-privatization" of
communal farming, which introduced private incentives aimed at boosting productivity and
GDP. This was followed by a policy which allowed rural households to invest their savings in
local businesses, manufacturing and transport, which gave rise to the so-called "town and
village enterprises". The ensuing trade liberalization reforms included opening up an export-
oriented processing segment, implementing a unilateral trade liberalization process and
joining the World Trade Organization (WTO).

https://www.imf.org/en/News/Articles/2015/09/28/04/53/sp030706
____________________________

The Gradual Development Stage of Trade Surplus (1990~1994)

In this stage, the basic characteristic of economy in China was an integration of planned
economy and market economy. During this period China management mechanism as well as
home and international economy were undergoing great changes. From saving and
investment’s prospective, China sustained trade surplus resulted from the higher ratio of
gross domestic saving than gross domestic investment since 1990. China became the largest
recipient of foreign direct investment among developing countries and grew into a large-
scale manufacture and processing bases. China has a comparative advantage in labor and
transaction costs which encourages FIEs to operate under this export promotion regime.
China has obtained remarkable achievements in absorption and utilization of FDI since
adopting its "open door" policy.

The High Speed Growth Stage of Trade Surplus (Since 1995)

This is mainly due to the adjustment of economic structure which causes a gap in export
growth and slower imports (imports of equipments) and this led to a sharp increase of trade
surplus.
Since the reform and opening-up, China adopted export- led model. To earn foreign
exchange through exports became the main purpose of the foreign trade policy. These are
all used to achieve economic growth. At the same time, in order to enhance the
competitiveness of export commodities, China has accepted a policy of returning indirect
tax in the export commodities to exporters. This policy stimulates exports effectively. It is a
way of “rewarding exports and limiting imports” policy and plays a significant role in the
formation of China’s trade surplus.

Since China implemented the "Promoting Trade through Science and Technology" strategy
in 1999, China's manufacturing goods exports have grown rapidly and have become an
important driver of China's trade surplus.

Confusion of Value of Exports With Value Added in Processing Trade

From the above analysis, processing trade’s contribution to trade surplus makes up the
absolute proportion. While many China processing enterprises have carried a strategy of
“both material input and finished product abroad”, raw materials or intermediate products
are imported from abroad and their finished products are to be re-exported. In this course
Chinese receive a small payment as processing costs. But the whole price of the finished
products is calculated into the export value. So the actual export trade volumes are
exaggerated. As Robert Koopman said, “In China’s processing trade to the US, the more
high-end and complex, the less proportion of domestic value-added will be”.

China’s Low Factor Prices and Environmental Costs

Compared with developed countries, the environmental standards in China are lower since
the prices of China’s factors such as labor force and land are lower than developed
countries. The lower standards encouraged transnational corporations to take China as a
processing workshop and develop the processing trade vigorously in China. In the
meantime, China’s exports of labor intensive products account for a larger proportion
because of the restrictions of factor endowments which are similar to those of Southeast
Asian countries’. On the one hand, the world markets have a big appetite for China’s labor
intensive products. On the other hand, they set restrictions on high-tech products to China.
This causes a sustained increase in China’s trade surplus.

_______________________________________________________________

A second explanation, the savings-investment gap, suggests that Chinese people have a
tendency to save more than they invest, which by definition creates current account
surpluses. It could be that the Chinese government’s lack of proper social services causes
people to save a larger portion of their incomes (Zhou, 2009), or that the underdevelopment
of the financial sector causes Chinese to invest a high proportion of their savings abroad, as
Corden’s “parking” theory argues (2009). While a current account surplus implies savings
exceeding investment, it is still a source of debate as to how and why this gap exists.
A third set of explanations for China’s large trade surplus beginning in the 1990s focuses on
industry and investment relocation. As manufacturing centers moved from Southeast Asia
to China through the 1990s and 2000s, especially in final goods production, trade surpluses
shifted from Southeast Asia to China (Huang and Tao, 2010). This theory is simple but
empirically speaking is not sufficient to independently explain the magnitude of China’s
current account surpluses over the 2000s. A similar theory proposes that Chinese
government domestic policies emphasized growth without first creating a financial system
capable of soaking up the excess savings produced by rising levels of national income. One
of the most important goals of the central government is maintaining high levels of
employment, which causes policymakers to focus on growth (Fan, 2008). The resultant
growth yields high levels of savings that, in the absence of a sophisticated financial system
with attractive home investment options, end up flooding abroad.

Finally, the demographics theory contends that the high number of Chinese of working age
during the 1990s and 2000s resulted in high growth and high savings. The sheer size of the
labor force produced excess output, making exports more viable and leading to high levels
of national savings, two forces that jointly put upward pressure on current accounts. (Zhu,
2007)

These theories can be divided into those that impact exports and imports and those that
impact savings and investment. Currency manipulation and industry relocation quite clearly
affect a nation’s net exports, while growth policies and demographics theoretically influence
both net export and net foreign investment.

Further, these theories are in many ways interrelated, and are certainly not mutually
exclusive (Huang). For example, demography, exchange rate policy and pro-growth policy
were motivating factors behind the relocation of manufacturing sectors from Southeast Asia
to China. Demographics and pro-growth policies also both had an effect on the savings and
investment gap. We might even argue that high levels of savings yielded a surplus of RMB,
prompting the government to intervene in currency markets through the purchase of
dollars. Any attempt to differentiate these effects would likely be in vain.

If we go more into details, it turns out that China is the leading supplier of the EU in a wide
range of manufactured products, starting from textiles, clothing and shoes through personal
and household goods and miscellaneous manufactures up to electronic data processing and
office equipment, telecommunication equipment, integrated circuits and electronic
components, non-electric and electric machinery. It is the second largest extra-EU supplier
of other transport equipment, power generating machinery, and ranks third in EU imports
of scientific and controlling instruments. At the same time, China is the most important
extra-EU market for raw materials (!) and the second largest for a wide range of products
(from non-ferrous metals through transport equipment and several machinery categories up
to scientific and controlling instruments.)

First, by far the leading exporter is Germany, representing 44 per cent of the EU-27 total
exports to China. Also, German exports are almost 4 times higher than those of second-
placed France, 6 times higher than those of Italy and 7 times higher than those of the
Netherlands and the United Kingdom. Also differences in imports are evident, but not as
dramatic. High import figures of The Netherlands and the United Kingdom incorporate
Chinese commodities re-exported to other EU member countries. Still, they only amount to
two-thirds of German imports, while French and Italian imports from China reach about 40
per cent of German imports.
23Second, there is a meaningful difference between the share of China in total exports and
imports of the individual EU member countries (here intra-EU trade has also been
considered). China is much more important as a supplier than as a market for all countries.
The gap is particularly big for all new members but, for different reasons, for the
Netherlands and the United Kingdom as well. For most member countries, exports to China
remain rather modest (between 1 and 3.3 per cent) as compared to total exports, except
Germany (5.9 % of total exports) and Finland (4.6 %). The corresponding import shares are
much higher and fluctuate between 3 and 6 per cent for most countries. Substantial upward
deviation can be registered for The Netherlands (the only country with a two-digit Chinese
import share) but also for the United Kingdom, Hungary and Italy.
24Third, as partly automatically coming from the previous presentation, all member
countries run deficit in their bilateral trade with China. However, the amount of the deficit,
and the coverage rate (how much imports are covered by exports) are very different, partly
reflecting the relative weight of trade relations with China, partly, and more importantly,
the relative competitive position of the respective EU member country in international trade
in general, and in China-related trade, in particular. In value term, the largest deficits appear
in the China-trade of the Netherlands and of the United Kingdom, to a large
extent explained by the hub position of redistributing Chinese commodities in other EU
countries as well. The coverage ratios are more telling. The first group, with the highest
competitive edge, includes Finland (almost balanced bilateral trade), Germany and Ireland
(above 80 per cent of imports from China are covered by exports). The second group, with a
higher than 50 per cent coverage ratio comprises Sweden, France, Austria and Portugal. All
other EU member countries register a lower than 50 per cent coverage ratio. It is
remarkable that exports to China of all new member countries can only cover less than 20
per cent of imports from China.

First, for three EU member countries, supply from China ranks second, including intra-EU
partners. In total German imports, imports from China are higher than imports from France,
the traditional key economic partner, and only second to imports from the Netherlands (due
to several factors, including the price of energy imported from this country). Following
imports from Germany, Chinese supplies rank second in total imports of France and the
Czech Republic. In most cases, China figures among the first five suppliers and clearly ahead
of imports from the USA (except United Kingdom and Ireland).
27Second, in exports of EU members to non-OECD countries, China is the leading market for
eight countries listed in the table (Denmark, France, Germany, Ireland, Netherlands,
Portugal, Sweden and the United Kingdom). In several other cases, it is placed second,
mainly after Russia.
28Third, the last column contains the most important message. In total imports from the
non-OECD world, for most EU countries China is the unquestionable leading supplier. In
some cases, China ranks behind Russia, but this ranking can easily be changed by falling oil
and gas prices (as it already happened in previous years).The broad statistical evidence
requires some concluding, summarizing and future-oriented (forward-looking) remarks.
29First, in the last decade, EU-China trade demonstrated not only a very dynamic
development but a manifest structural upgrading as well. As a result, the traditionally
complementary nature of trade has become increasingly competitive (from inter-industry to
intra-industry trade pattern). [12][12]Between 2000 and 2010 the complementarity index
for European… However, as decades long experience with the rapid growth of intra-industry
trade among the developed countries shows, intra-industry trade does not only create more
competition but also opens up new areas of cooperation and generates structural
transformation on macro-, mezo- and micro-levels of production alike.
30Second, volume and structural changes of EU-China trade relations have been leading to
more (although not always balanced) interdependence, deepening cooperation and
developing or joining existing and new international production chains. Interdependence
was obviously strengthened by further economic opening up and liberalization both on the
global level and in the EU-China context. Increasing export-orientation made both sides
more ‘vulnerable’, but at the same time, also more responsible for each other’s
development, and more aware of mutual dependence and need for further
cooperation. [13][13]A study prepared by Deutsche Bank Research, “Starke…
31Third, EU imports from China include a substantial share of goods processed in China (so-
called processing trade) by European but also American, Japanese, Taiwanese, Hongkong
and other companies. About half of China’s exports are produced by companies with
(different share of) foreign capital (and technology). Although until now most European
companies invested in China for producing for the vast and rapidly broadening internal
market, several firms were led by cost-saving in their investment decisions. Relocation of
the labour-cost sensitive light industry (including part of the fashion industry) generated
significant export potential and export flows from China back to Europe. More recently,
relocation process reached environment-polluting but also medium-technology sectors or
those firms which wanted to overcome trade and technical barriers by installing production
capacities in China. In addition, the size of the Chinese market allowed large-scale
production, mostly for the domestic market, but partly also for cost-effective exports back
to Europe. [14][14]In more detail see John Farnell, “Time for a reality check on…  (In this
process, Japan and partly Korea hold a leading position. This is at least a partial explanation
of low dynamism of Japanese exports to the EU, because original Japanese products come
to Europe from production in China.) Thus, an important, although not quantifiable part of
Chinese exports to Europe include commodities produced by European companies (mostly
in cooperation with Chinese ones) in China.

Fourth, partially wide differences in imports from China of the individual EU member
countries have to take into consideration three essential motives of Chinese exports. Part of
commodities arriving from China serves domestic consumption. However, another and in
some countries more important part enters the global or European production chain and
will be used as imported component in manufacturing both for exports and for the
respective European domestic market. The third explanatory factor of large import figures
for some countries (first of all for the Netherlands) is the role of a regional distribution
centre. In this case, imports from China partly appear as exports from the country with
distribution network (so-called hubs for Chinese exports to Europe that can be found in
several member countries, including in new members of the EU).