China has acknowledged the Draghi Report but has unofficially reacted negatively to its contents. Chinese media are aware of the report's findings and have expressed displeasure and criticism. This indicates both acknowledgment of the report and a clear stance against it.
The media criticizes the report as a simplistic pursuit of protectionism, claiming it mirrors the actions of both the US and EU. They argue that the recommendations are just more clichés, suggesting the EU should address trade issues with China through dialogue rather than sanctions, such as increased tariffs. According to the media, the EU's problems are self-inflicted, and it should stop blaming China for its own challenges
EU’s Dependency on Chinese Imports
Out of nearly 10,000 items the EU imports from China at the 4-digit HS code level, roughly 2% represent over 50% of the EU's total imports in those categories. Whether this level of dependency is considered critical depends on perspective. For instance, many may not find it concerning that 98% of baby strollers and 89% of umbrellas imported by the EU come from China.
After reviewing the Draghi Report, we revisited some key categories using our in-house tool. While others may focus on different areas from the nearly 200 items where over 50% of EU imports are sourced from China, we identified the ones that are particularly relevant to us. A recent concern, for instance, has been the EU's reliance on China for Active Pharmaceutical Ingredients (APIs).
However, you won’t see APIs on our list below, as the current dependency is around 33%, falling short of the 50% threshold. We are currently enhancing our tools to generate detailed dependency reports down to 8-digit HS codes on demand.
EU-China Trade
While 87% of EU companies exporting to China are SMEs, they only account for 20% of the total export value. In contrast, the remaining 13%—larger companies—make up 80% of the export value. On the import side, 94% of EU companies importing from China are SMEs, responsible for half of the total imports. The other 6%—comprising large companies—contribute the remaining 50%.
EU exports
China’s reliance on EU exports is heavily concentrated among large EU companies, with just 13% of EU firms exporting to China accounting for 80% of the export value. Any disruption in trade or relations with these key players could significantly affect China’s access to high-value goods from the EU.
China has lost interest in the broad base of smaller EU companies as a crucial part of its import supply chain.
EU imports
The significant number of EU SMEs involved in importing from China reflects China’s role as a global supplier of lower-value consumer goods and materials. These imports are crucial for EU small businesses that depend on China’s efficient production and low costs.
The EU’s dependence on China is evident, with just 6% of large companies handling half of its imports. Any disruption in trade with these key firms—whether through tariffs, regulations, or supply chain bottlenecks—could have wide-ranging effects on EU markets.
No doubt China will use its trade leverage to maintain or expand its share of EU imports.
For Every Euro China Spends on EU Imports, It Gains the Same in Trade Surplus
Draghi Report: Critical Minerals, Trade, and China
“Export restrictions from China grew by a factor of nine between 2009 and 2020. Little progress is being made so far with diversification. Compared with three years ago, the share of the top three producers for key Critical Raw Materials either remains unchanged or has increased further”
EU Chamber of Commerce in China Expresses Concern and Urgency Over Business Challenges
Annual EU Chamber of Commerce in China (EUCCC) Position Paper released
The mood of Jens Eskelund, Chairman of EUCCC, appears to be one of concern and urgency. He acknowledges the significant potential China still holds but expresses frustration and dissatisfaction with the current situation. Eskelund is indicating that the challenges of doing business in China are increasingly overshadowing the benefits, leading to heightened scrutiny from investors. His call for more action from the Chinese Government, not more action plans suggests a demand for concrete measures rather than additional strategies or plans, reflecting a sense of impatience and a need for substantial change.
Discrepancy in Trade Data: Ireland's Exports vs. China's 'Entrepôt Trade' Classification
The significant discrepancy between Ireland's reported HS3002 exports to China and China's import data arises from China's classification of a large portion of its HS3002 imports from Ireland as 'entrepôt trade.'
However, Ireland does not report such exports, or they may not exist
Spain's Prime Minister Visits China Amid Trade Tensions and Significant Deficit
China's Trade Lower than in 2022, but Surplus Continues to Grow
Imports are even smaller than three years ago
As a result, surplus grows
China's Twelve-Month Surplus Nears $900 Billion
This amount is equivalent to 1% of the rest of the world's GDP.
From January to August, China increased its surplus by 5.5% compared to the same period a year earlier.
It’s About Time: IMF Notices China’s Surplus
China’s trade surplus increased substantially at the beginning of the pandemic.
Cheap China is Making a Comeback
The Spanish Prime Minister's efforts last week to mediate a solution on tariffs for China's electric cars show a frequently overlooked aspect of Chinese exports: affordable goods.
“Cheap China” is making a comeback through platforms like AliExpress, Miravia, Shein, Temu, TikTok, and others. While Spain is a notable example, this trend is widespread. Affordable online exports are now the second most-exported category from China globally, and in Spain, they top the list of Chinese exports
As Expected, Liège Customs Run Out of Patience with China’s Online Platforms
Liège Customs could block ecommerce shipments after losing patience - Charlotte Goldstone reports.
Administrator general of Belgian customs, Kristian Van der Waeren, has “lost [his] patience” with non-compliant ecommerce coming into Liege airport and threatened to block shippers not playing by the rules.
U.S. Administration Targets China’s E-Commerce Platforms
Over the last ten years, the number of shipments entering the United States claiming the de minimis exemption has increased significantly, from approximately 140 million a year to over one billion a year. As a result, the Biden-Harris Administration is taking new actions to address
the significant increased abuse of the de minimis exemption, in particular China-founded e-commerce platforms,
White House statement here
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