MNI: France Deal Key To Avoid EU Trade War - China Advisor

China expects challenging negotiations to avoid a trade war with the EU over its electric vehicle exports, with officials in Beijing regarding France as taking a harder line in the talks than other member states such as Germany, a policy advisor monitoring talks told MNI.

The EU has launched a probe over fears unfairly cheap finance and subsidies have led to the rapid increase of China’s EV exports, which now account for 8% of the EU's EV market and could reach 15% by 2025, according to the European Commission. But in negotiations so far, Germany's position in the talks has been restrained by concern for its commercial interests in China, leaving France the key to avoid escalation, said Gu Xueming, director at the Chinese Academy of International Trade and Economic Cooperation and member of the 14th National Committee of the Chinese People's Political Consultative Conference.

“German EVs are high-end models, there is more room alongside our EVs,” Gu said. Less competitive French EVs, however, occupy a lower market segment with higher price sensitivity, making the French more supportive of tariffs, he added.

While Gu told MNI the popularity of Chinese cars in Europe could aid Bejing in negotiations, he still expected challenging negotiations.

“Even though our export prices are higher than domestic levels, we are still cheaper than EU manufacturers, this makes the situation difficult,” he said.

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Policy advisors recently told MNI both sides could aim for a similar outcome achieved in 2013 when the EU accused China of dumping solar panels, which resulted in a minimum price and volume limit on imports within a certain period. (See: MNI: China Should Negotiate With EU Over Potential EV Tariffs - Bonds & Currency News | Market News)

In a recent visit to Beijing, EU Trade Commissioner Valdis Dombrovskis blamed unfair Chinese market access and other challenges for the rapid increase in the bloc’s trade deficit’s with China to EUR400 billion in 2022.

French Minister for Finance Bruno Le Maire recently expressed support for the EV probe and in September, the country published fresh EV incentive rules to exclude Chinese-made cars. German Transport Minister Volker Wissing, meanwhile, has warned tariffs could damage the German economy.

But Central Bank of Hungary Governor Gyorgy Matolcsy, a former economy minister, told MNI that the EU had to address its own competitiveness and that encouraging the expansion of Chinese firms into local manufacturing within EU countries would represent a “win-win” approach as opposed to the probe and tariff route. “Some EU carmakers have been too lazy for too long – they have gotten behind the curve,” he said.

Data from the China Passenger Car Association showed China exported 339,000 vehicles from January to August this year, up from 338,000 for the whole of 2022. The EU will invite the Chinese government and automakers to present evidence and arguments during the anti-subsidy probe.