ECB says China’s industrial rise is crowding out EU exporters

The European Central Bank warned Tuesday that China's rapid industrial transformation is crowding European firms out of global markets, with German companies bearing the brunt of intensifying competition in sectors that have long underpinned European economic growth.

Growing Competition in Key Sectors

In an Economic Bulletin article published on Sept. 22, the ECB found that the EU's share of global goods exports has declined "particularly in sectors and destinations where China has strengthened its global presence, notably machinery and transport equipment." Among the EU's largest economies, Germany has the greatest export similarity with China, making it the most exposed to direct competition, while Italy has the smallest overlap. Smaller countries like Ireland and Greece were among the least affected.reuters

The ECB noted that China is also importing fewer European products as its domestic production expands, a shift "most pronounced in economies integrated into European manufacturing and automotive value chains, including Germany and several central European economies."reuters

The findings landed alongside the annual position paper from the European Union Chamber of Commerce in China, which represents more than 1,600 member companies. Chamber president Jens Eskelund called the current trajectory "unsustainable," pointing to persistent supply-demand imbalances in China that have fueled a surge in exports. The chamber noted that China's share of global container exports climbed to 37 percent last year, while its overall trade surplus reached a record high. China's trade surplus with the EU alone reached $242 billion through the end of August, exceeding its surplus with the United States.nst

Beijing Pushes Back

China's Commerce Minister Wang Wentao responded by urging the EU to keep its auto markets open. "China is not the source of the EU's economic and trade problems, but a partner in solving them," Wang said after meeting Monday with German Association of the Automotive Industry President Hildegard Müller. In a separate call with Mercedes-Benz CEO Ola Källenius, Wang said the auto industry is a key area of China-EU cooperation and welcomed European automakers to expand investment in China.bloomberg+1

Trade Talks Loom

Wang's remarks come as Germany prepares economic-security measures that could include new tariffs on hybrid electric vehicles and stronger export controls, with cabinet approval targeted for Oct. 14. EU leaders plan to meet next month to discuss the trade deficit with China, and Beijing and Brussels have agreed to an October deadline to make progress on trade disagreements. The EU chamber urged China to shift toward a more service-based economy to help address the imbalances fueling friction between the two trading partners.scmp+1