Chinese Online Export Tsunami Floods the EU: Well, How Did We Get Here?
Issue 204, Monday 7th July 2025
In 1981, the band Talking Heads released the uncanny track Once in a Lifetime, with a bewildered David Byrne famously asking, “Well... how did I get here?” Their hit took time to catch on, unlike platforms like TEMU, TikTok, AliExpress, and SHEIN, which exploded overnight to reach nearly €30 billion in exports to the EU
So... how did we get here?
Around 2015, China was buzzing with new tech. QR code mobile payments were changing daily life, and domestic e-commerce was growing at more than 30% annually. Across Europe, online shopping was just getting started, with Amazon leading the charge.
Back then, in a Beijing chat, a colleague confidently claimed: international e-commerce directly from Chinese producers to foreign consumers couldn’t work on a large scale without the “general trade” model. That meant shipping in bulk containers to European importers, who would handle distribution
Anything else was, they insisted, logistically and commercially impossible. The main hurdle? Returns. What if a European buyer didn’t like the product?
The Opening Move
In reality, a quiet workaround was already in play. The Chinese diaspora across Europe had taken on the role of middlemen. They imported cheap goods through general trade, supplying thousands of mom-and-pop shops offering unbeatable prices on everything from screwdrivers to pots and pans. This happened long before cross-border e-commerce became mainstream.
But that wasn’t enough. Mainland sellers wanted more. They wanted to sell online, globally, and directly to consumers.
UPU: The Spark That Lit the Fuse
Chinese shippers soon uncovered a hidden advantage in the Universal Postal Union (UPU) rules. Developing countries like China paid lower rates to send parcels to wealthier nations. Postal services in richer countries covered part of the final delivery cost. This made shipping to Europe cheap. Better yet, sellers could promise full refunds if customers returned products, because returns rarely happened. Sending items back to China was just too expensive
The First Trump Era: Back to Drawing Board
In 2017, Donald Trump took office and threatened the U.S. withdrawal from the UPU. The administration argued the system unfairly subsidized Chinese e-commerce, letting them ship parcels at below-market rates. Compared to today’s giants, those platforms were dwarves then, but it was sometimes cheaper for a merchant in China to ship a 100-gram package to New York than for a Texan small business to send the same package across their own state.
2019: The Compromise
The UPU had never faced a major power leaving. The U.S. exit would have disrupted global postal logistics and the agency’s finances. So in 2019, a compromise was reached in Geneva: the U.S. could set its own inbound delivery rates, and a transition period was created to phase out China’s preferential rates.
China Inc. Makes Its Move
Toward the end of the last decade, the Chinese state began actively guiding domestic platforms to export directly to consumers abroad. This shift meant companies could act strategically, aligning with government ambitions through tight coordination. One early sign was a mysterious customs code quietly added to China’s export system.
The New Customs Code That Few Noticed
Even seasoned traders missed it. This new code allowed bulk export declarations for low-value goods in a single stroke. Platforms could now fill containers with cheap underwear, corkscrews, beach balls, and colorful phone cases, declaring it all under one code. Once in the EU, shipments cleared tariff-free under the low-value exemption for goods under €150.
Meanwhile, the government quietly supported these ambitions with pilot programs starting in 2017 in Hangzhou, AliExpress’s hometown, expanding nationwide the next year through discreet customs announcements.
We Pointed to the Warning Signs
Throughout 2019, we shared our concerns as widely as we could abroad, including with policymakers, but to no avail. The warnings weren’t merely ignored; they vanished from memory once the world was thrown into turmoil in 2020
2020 Pandemic Boom: Shein/Temu Accelerated Adoption
As COVID spread fast, tangled supply chains and lockdowns trapped people at home. Suddenly, everyone wanted affordable goods online, from kitchen tools for baking to small music kits for making tunes. The online shopping boom exploded.
EU customs and their U.S. counterparts had no time, resources, or interest in scrutinizing millions of low-cost parcels arriving from China. Who could open a package worth a few dozen euros to check if a phone case was really just a case and not the phone itself?
Post-COVID: Cheap China Is Back With a Vengeance
Chinese platforms smelled blood. The government noticed the exponential growth, and that obscure customs code quietly introduced years ago became China’s most exported item, overtaking cellphones, integrated circuits, solar panels, and electric cars. Official rhetoric mentioned “new drivers of growth,” but China Inc. was laser focused in just one thing: Cheap China was back.
And just look at the data below, the curve fit is exponential.
2023: Institutionalizing the Code
In 2023, the Chinese government made the special customs code official through new directives. Guangdong province led the way, accounting for about 40 percent of all Chinese platform exports.
So that’s how we got here. But where are we now?
Well, after years of watching a flood of parcels sweep into Europe, Brussels has finally taken notice. EU Commissioner McGrath now insists that Chinese platforms must play by EU rules. Commissioner said last week
“We have experienced an explosion in the volume of small parcels being imported into the EU. 4.6 billion small parcels last year. If you’re dealing with a volume such as 12 million parcels a day coming into the European Union, that would stretch any system to breaking point and beyond”
The response? A €2 fee per package. Yes, now the EU wants to put a speed limit on a turbo-charged parcel pipeline that’s been flowing wide open for years. Still, better late than never.
That’s all, folks!
[…and you may ask yourself, "Well, how did I get here?”…]
Overcapacity: Xi Jinping’s Verbal Gymnastics
A year ago, Xi flatly denied that China had anything resembling overcapacity. Now, in classic spin mode, he concedes the problem but only after some serious verbal acrobatics to avoid admitting he was wrong. With solar panel prices crashing to just over 0.6 yuan per watt, and China’s so-called new growth engines selling more and losing more, the fiction had run its course. It was high time the leader dropped the charade.
People’s Daily rubs salt in the wound
In efforts to reduce prices and costs, some companies also resort to cutting corners, reducing quality and components, blindly copying and infringing patents, and engaging in malicious smearing and false advertising.
China’s Claim as Africa’s Top Trade Partner Overlooks the EU
China frequently claims that it has been Africa’s largest trading partner for many consecutive years. However, this assertion reveals a clear pattern of selective framing if not outright duplicity. China is fully aware that the European Union functions as a single trade bloc. Yet it chooses to disaggregate the 27 EU member states in order to downplay EU’s role and inflate its own relative importance. This is not an oversight but a calculated strategy to support China’s preferred narrative.
The One Thing China Leaves Out When It Talks About Africa: The Trade Balance
So Much for China’s Global South Narrative
China Slaps Five-Year Anti-Dumping Tariffs on French Cognac
The ruling was issued on July 4 and will be effective for five years starting immediately.
Don’t be fooled by the way China drafts its note. In practical terms, a price undertaking works much like an anti-dumping tariff, using a negotiated floor price instead of a duty collected at the border
Just ahead of the July EU-China summit, China’s decision to slap anti-dumping duties on EU Cognac marks yet another downtick in relations
PMI Employment Subindex Drop in June
The June 2025 PMI employment subindex returned to the average level of the first half of last year.
A U.S. Cautionary Tale with Vietnam
According to Mr. Trump himself, the trade deal with Vietnam comes with a warning: a 40% tariff on any transshipping. Correlation isn’t causation, but there’s certainly reason to raise eyebrows, hence the steep 40% penalty
As for the European Union, China attributes concerns about trade diversion to what it calls 'political anxiety.' In any case, Vietnam is on the EU's watch list as a potential hub for Chinese trade diversion
China Hits Back at EU Measures on Medical Devices
On July 6 the Ministry of Commerce of China said that
“Following European Commission measures to restrict Chinese companies and products from participating in the public procurement of medical devices, China has no choice but to take reciprocal restrictive measures”
China’s reciprocal measure is crafted to appear even-handed, but it carries a strategic twist: it rewards relocation. EU companies that manufacture medical devices in China are exempt from the restrictions. It’s a form of pressure disguised as openness, one that drives a wedge between EU firms with local operations and those without.
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About time that the EU stops this flood, as it's 'man made' (largely by China)
Re the final item: China's restrictions are structured to be exactly reciprocal to those of the EU. That is to say, it is not a nefarious secret plot by China to treat imports differently than locally manufactured medical devices – it's the exact same set of penalties & incentives imposed by the EU measures, which also "reward relocation" by Chinese firms into Europe. Indeed, a distinction between locally manufactured products and imports is a fairly normal feature of trade policy.