Although the Chinese economy contracted in the first quarter of 2020 due to the coronavirus outbreak, it later recovered. This was due to the increase in demand from the European Union (EU). Among the world’s largest economies, only China grew in 2020.
In 2020, China surpassed the U.S. to become the largest trading partner of the EU. EU exports to China grew by 2.2% last year and imports rose by 5.6%. In comparison, exports to the U.S. dropped by 8.2% and imports fell by 13.2% according to data from Eurostat. The total value of imports and exports between China and the EU reached $709 billion last year. Trade between the EU and the U.S. remained at $671 billion.
Below are some reasons for the increased trade between the EU and China.
- China bought cars and luxury goods from Europe and benefited from the European market’s growing demand for healthcare equipment and electronic products.
- The mutual increase of customs duties between the U.S. and the EU on some products such as steel, French cognac and American Harley-Davidson motorcycles was effective.
- The EU and China are trying to mutually strengthen their economic ties. The parties are working on investment agreements that will facilitate European companies’ entry into the Chinese market.
Also, experts weighed in with their reasons for the growth of the China-EU trade relationship:
“The reason behind it is clearly the fact that China/Asia is the only region going through a nice V-shaped recovery,” ING Germany economist Carsten Brzeski told CNBC on Tuesday. “The coronavirus pandemic has had a disproportionate economic impact all over the world. In fact, China, where the first Covid-19 cases were reported, has not gone through severe social restrictions for a second time as it has been the case in many European nations’’ as per BBC.
The deal, which seemed to have been rushed through before Joe Biden’s inauguration in late January, prohibits China from stopping access or introducing new discriminatory practices on manufacturing and some service sectors. At the time of the announcement, Europe’s trade expected to register the second-highest growth rate globally in 2021, according to forecasts from the International Monetary Fund. Europe’s Trade Commissioner Valdis Dombrovskis said, “The current crisis gives us no other option but to work hand in hand with our global partners, including China.” He added “By pulling together we can recover more quickly economically and make progress on areas of mutual interest such as trade and investment relations.”
As a result, the Chinese economy is performing slightly closer to pre-Covid levels in comparison with other parts of the world, where restrictions are still taking a toll on activity.