EU Trade with China: the Problem of Scarcity

For many years, the European Union had run sizable deficits in its trade with China, before it increased up to almost 400 billion euros in 2022. This article has a twofold objective. First, it analyses the dynamics of EU balance of trade deficit with China relying on data by UNCTADstat in US dollars. Second, it investigates the reasons of its persistence and a sharp boost in 2022. The results suggest that the ratio of EU deficit to its imports from China declined from up to 70% between 2000 and 2008 to nearly 50% in the 2010-th thanks to the higher rates of European exports to China compared with its imports. Nevertheless, Germany alone continued to account for 1 / 2 of EU exports to China. A large group of EU Member States improved their overall trade balances in the 2010-th but showed little progress in doing so in their trade with China. In dollar terms, EU exports of manufactured goods to China fell by 7% in 2022 that was in line with the total drop of China's imports. By comparing China's total imports of machinery and transport equipment (SITC 7) with its imports from the EU we find that European exporters have come under less pressure from contracting Chinese import demand than producers from other regions. Altogether, the sharp rise of EU deficit in its trade with China in 2022 occurred due to the declining domestic demand in China and its shift from investment to private consumption. The notion that the overall state of the business environment in China constrains EU exports needs more accurate empirical verification, since from 2000 to 2020 European merchandise exports to China developed at a much higher rate than to the rest of the world.