‘De-risking not decoupling’ with Beijing – but what does the EU actually mean?

Last Friday (29 May), following a debate among the college of commissioners, the EU Commission said that its “overarching approach remains de-risking, not decoupling” and described China as a “critical partner”.  

“At the same time the current state of the trade and investment relationship is not sustainable. As economic and security interests become ever more intertwined, both dimensions will require a more robust and coherent response,” the commission added. 

But detail was in short supply. 

What to do about China will be on the agenda at this month’s G7 summit in France and EU leaders’ summit. Even so, quizzed by reporters on Monday (1 June), commission spokespeople were only slightly more forthcoming. 

“It must be recalibrated, it must be reciprocal, it must be fairer,” said trade spokesman Olof Gill of the EU-China trade relationship.

For her part, chief spokesperson Paula Pinho stressed the importance of unity. 

“Only the EU as a whole can make a difference, not 27 different member states,” she told reporters. 

Though neither Pinho or Gill would confirm it, the commission is believed to favour a so-called ‘overcapacity instrument’ designed to impose a cap on Chinese exports of certain products and to address the trade imbalance whereby China is responsible for 30 percent of the world’s exports but just 13 percent of its consumption. 

‘Unsustainable’ but still growing

Left unchanged, China’s trade surplus, described as “unsustainable” by EU officials, will continue to grow. It hit €360bn in 2025 and China’s surplus with the EU’s industrial champion Germany doubled in the first three months of this year. 

The commission says that there is no room for debate about the issue of Beijing’s overcapacity and supply and that China’s unfair trading practices extend to unfair subsidies, export restrictions and market access. 

“There’s an issue of over-capacity and that’s a diagnosis that is shared around the world,” said Gill, who added that it was “overdue that this problem is meaningfully addressed. 

European firms appear to be up for the fight, perhaps buoyed by an OECD report has concluded that Chinese companies received state subsidies of between three and 8 times that received by their European rivals. 

An open letter signed by more than 20 industry bodies has called for “a more strategic use of the Foreign Subsidies Regulation”, a mechanism by which the EU can investigate and counteract subsidies provided for products by foreign governments.

It also urged the EU to use its trade defence instruments with “more flexibility, faster and preventively”. 

The letter’s reference to “unfair trade practices” in “non-market economies” that pose a threat to European supply chains is clearly aimed at Beijing. 

China fights back

But China is not taking these threats lying down, promising to impose “resolute countermeasures” if the EU moves ahead with the overcapacity instrument which it says would impose discriminatory restrictions on its companies and products.

That could lead to even more tit-for-tat measures and a full-blown EU-Sino trade war. 

That, in turn, leaves the EU trying a find a careful balance; on the one hand describing China as “one of our most important partners” and with whom “we are having a dialogue” – and yet on the other threatening it with the bloc’s toughest trade defence tools.  

But dialogue with Chinese officials has not had much success beyond last October’s agreement by China to suspend new restrictions on rare earth exports following a backlash from the EU and the US Trump administration.

After some early optimism about a Chinese offer on minimum pricing, lengthy talks on electric vehicles after the EU imposed additional tariffs of up to 36 percent back in 2024 ran aground.

Beijing’s trade policies might be more predictable than president Donald Trump’s, but they are no easier to bargain with.