China-EU ties: Openness and Investment serve as a cure for bilateral trade imbalances

Editor's note: Ge Lin is a journalist and an economic commentator with CGTN. The article reflects the author's opinions and not necessarily the views of CGTN.

The China-EU summit held on Thursday was closely followed across Europe, with observers and media outlets offering a wide range of commentary. While some viewed the meeting as lacking headline-grabbing outcomes, this sentiment does not signal disengagement or indifference.

On the contrary, such reactions often reflect underlying expectations—expectations that stem from the growing importance both sides attach to their comprehensive relationship. Without expectation, there would be no disappointment. Europe's concern over limited deliverables stems precisely from its hope for a more constructive China-EU economic relationship.

Instead of being distracted by the absence of immediate gains, it may be more meaningful to acknowledge a slower-moving, long-term structural logic: strategic rebalancing requires not just policy adjustments, but a reconfiguration of economic mentality—on both sides, but particularly in Europe.

European concerns over trade deficit are rooted in an efficiency gap

The recurring complaint that "Chinese products are too cheap" reflects a deeper unease—not with China per se, but with Europe's own competitiveness. What appears as a fear of a flood of imports is, in essence, an acknowledgment of Europe's own structural inefficiency.

Much of the current European narrative misreads the deeper source of China's industrial competitiveness. In sectors such as electric vehicles, photovoltaics, and consumer electronics, China's advantage today is increasingly shaped not by short-term cost incentives, but by sustained innovation and a growing emphasis on quality.

In recent years, China has increasingly steered its economic strategy toward innovation-driven and high-quality development. For companies, this means moving beyond reliance on price competition and low-margin expansion.

In the past few months, a new policy narrative has emerged under the banner of combating "involution"—a term widely used in China to describe excessive competition that fails to yield meaningful progress. Rather than rewarding the fastest or the cheapest, the current environment increasingly favors firms that prioritize originality, durability, and strategic depth.

This internal transformation in China is not often noticed in Europe's external policy discourse. Yet it should be. China's shift toward high-quality growth is precisely aimed at addressing many of the structural concerns that Europe now raises—from overcapacity to price competition—through domestic policy reforms.

For Europe, a fuller understanding of China's internal drive—rather than a sole focus on trade remedies—would better serve the long-term interests of China-Europe cooperation.

In the same spirit, Europe would do well to reassess its own industrial fundamentals. A lasting solution depends less on trade negotiations and more on revitalizing domestic strategy and building real competitiveness from within.

A misread trade deficit: The real rebalancing lies in investment

In economics, net imports imply net capital inflows, just as net exports imply capital outflows. In other words, Europe's trade deficit with China should mean that Chinese capital is—or ought to be—flowing into Europe in return.

However, Chinese capital entering Europe can take different forms, and not all of them translate into tangible economic benefits. Among these, the most meaningful and productive form is direct investment—such as building factories, establishing local operations, or integrating into supply chains. Such investment brings tangible gains to Europe's industrial base, including job creation, supply chain resilience, and the revitalization of local manufacturing.

But if Europe obstructs or discourages Chinese direct investment, then capital inflows may remain purely notional—confined to holdings of bonds or foreign exchange reserves—without translating into enhanced competitiveness or productive capacity on the ground.

Thus, rather than viewing the trade deficit merely as a liability, Europe could regard it as a channel through which Chinese capital is transformed into productive assets on European soil. Many Chinese enterprises are not only capable of, but also interested in, participating in Europe's advanced manufacturing, digital infrastructure development, and green transition. If properly guided, these investments could support Europe's strategic priorities by reinforcing industrial capacity, upgrading supply chains, and fostering long-term economic resilience—within Europe's own borders.

A similar dynamic has unfolded over the past decades: European investments in China have played an important role in enhancing China's industrial capacity and productivity. This experience offers a valuable reference for how Chinese firms investing in Europe could also contribute positively to local economies.

What this suggests is simple: Europe's trade deficit with China becomes a big issue only when it is not balanced by productive investment into the European economy. Dismissing Chinese direct investment based on vague political concerns forfeits valuable opportunities to reinforce Europe's industrial capacity and future competitiveness.

Waiting while the world moves: Europe's strategy needs an update

There is a growing irony in the current geopolitical landscape. While the United States is actively pressuring global capital and manufacturing to relocate to its own shores—including from China—Europe hesitates even to resume negotiations on the Comprehensive Agreement on Investment (CAI) with China.

This hesitancy comes at a time when Europe's own economic structure is under strain. The energy transition, industrial decarbonization, and the pursuit of supply chain resilience all require external resources—both financial and technological. Yet Europe remains constrained by a defensive mindset rooted in imagined risks.

Much of the concern revolves around fears that Chinese firms may carry ulterior political motives. But this remains an assumption—more psychological than factual.

To be clear, openness does not mean recklessness. Investment screening and national security considerations are legitimate, but when such concerns dominate to the point of paralysis, they undermine the very goal of European industrial competitiveness. Europe must learn to distinguish between strategic caution and strategic stagnation.

Chinese firms have shown no lack of willingness to engage. What is missing is a stable framework of trust and clear operational mechanisms. In this regard, relaunching the CAI negotiations should be seen as aligned with Europe's own interests.

Even as the CAI remains stalled, practical alternatives exist. European and Chinese enterprises can pursue co-financed manufacturing bases, while governments can support joint pilot zones and cross-border industrial cooperation platforms.

Europe's true leverage lies in openness

Rebalancing the China-EU economic relationship is not about simply cutting Chinese exports. Rather, it calls for Europe to broaden its perspective and better harness the opportunities presented by foreign investment. Achieving structural balance is not a matter of short-term controls, but of cultivating a mature mindset—one that moves beyond zero-sum thinking toward shared growth and capacity-building.

Europe is far from powerless in this dynamic. But its real leverage lies in openness backed by confidence—not in delay backed by caution.The choice is whether Europe will actively shape the terms of a mutually beneficial partnership—or risk being shaped by its absence.