China-Europe relations enter a rebalancing phase: from "de-risking" to the coexistence of structural competition and cooperation.

China-EU Relations Enter a Rebalancing Phase: From "De-risking" to the Coexistence of Structural Competition and Cooperation

In midsummer 2026, China-EU relations enter their 51st year. In official narratives, the two sides still refer to each other as "comprehensive strategic partners," but the thermometer readings between Brussels and Beijing have long since drifted away from the comfort zone of symbolic diplomacy. At the China-EU summit in July 2025, compressed into a single day, European Commission President Ursula von der Leyen characterized the bilateral relationship as a "turning point"—not diplomatic rhetoric, but a public confirmation of the EU's cognitive framework toward China.

Behind the metaphor of the "turning point" lies a new normal devoid of consensus: both sides acknowledge that the existing framework must be adjusted, yet they hold no shared expectations regarding the direction or endpoint of that adjustment. Based on the latest research reports and viewed from the perspective of European business research, this article sorts through the pragmatic foundations for cooperation in China-EU relations, the essence of structural frictions, and how the EU's economic security policy will reshape the pattern of bilateral interaction in the years ahead.

I. The Resilience of Economic Interdependence: Over $500 Billion in Two-Way Investment and High-Frequency Dialogue Mechanisms

Despite the increasingly tough geopolitical narrative, the underlying engine of China-EU economic relations continues to operate. In 2025, total China-EU trade in goods reached $828.11 billion, up 5.4% year-on-year; in the first quarter of 2026, it recorded a 17.6% year-on-year increase, with double-digit growth in both exports and imports. The EU's position as China's second-largest trading partner, and China's position as the EU's largest source of imports, will be difficult to replace in the short term.

This interdependence does not rely on a single trade corridor. The China-Europe Railway Express has accumulated over 110,000 trips, covering 229 cities across 26 European countries, and has become a second supply chain lifeline alongside maritime shipping. In the first quarter of 2026, the China-Europe Railway Express operated 5,460 trips, carrying 546,000 TEUs of goods, up 29% and 22% year-on-year respectively. The continued expansion of this overland corridor not only hedges against geopolitical risks in regions such as the Red Sea, but also profoundly reshapes the logic of industrial division of labor across the Eurasian hinterland.

On the investment front, cumulative two-way investment has approached $260–280 billion. In 2025, the EU's actual investment in China reached $6.39 billion, and German companies invested over €7 billion in China that year, a record high since 2021. European multinationals such as Volkswagen, BMW, and Siemens continued to increase their R&D and manufacturing bases in China. Industrial surveys show that 68% of European companies chose to maintain or expand their operations in China, with nearly one-third further deepening localized production. Meanwhile, China's direct investment in the EU reached $9.22 billion, mainly flowing into new areas such as electric vehicles, batteries, and logistics—the joint battery plant between CATL and Stellantis in Aragon, Spain, and BYD's expanded electric vehicle plant in Hungary are typical footnotes to this trend.From an industrial structure perspective, China-EU trade complementarity remains significant. The EU exports high-end equipment, medical devices, and consumer goods to China, and China's imports of high-tech products from Europe grew 11.1% in 2025. China exports electromechanical products, new energy equipment, and daily consumer goods to Europe, with over 90% of new energy vehicles entering Europe via the Port of Antwerp. Although there is a structural deficit in services trade, China's services trade deficit with Europe reached $48.3 billion in 2025, of which intellectual property royalties alone exceeded $10 billion, precisely reflecting the real returns European companies obtain from the scale of the Chinese market.

II. The Manifestation of Structural Divergence: Trade Deficit, Industrial Policy, and the EU's Economic Security Turn

If economic interdependence is the ballast, then structural divergence is the undercurrent. The EU's trade deficit with China was approximately €308 billion in 2024, expanding further to €360 billion in 2025—an average of about €1 billion per day. In the first quarter of 2026, China's trade surplus with the EU reached $83.13 billion, a year-on-year growth rate of 30.2%. This figure has evolved from an economic issue to a security issue on the political spectrum in Brussels.

EU policymakers believe that the deficit is not purely the result of market forces, but rather the combined effect of China's state-led industrial policies, asymmetric market access, and overcapacity. China accounts for about 30% of global manufacturing output but only 13% of global consumption. This scissors gap is particularly prominent in green technology sectors such as electric vehicles, photovoltaics, and batteries. Based on this logic, the EU's "de-risking" policy has gradually evolved in practice into an economic security toolbox encompassing anti-subsidy investigations, the Foreign Subsidies Regulation, the International Procurement Instrument, export controls, and investment screening.

It is worth noting that the scope of application of these tools is expanding. The EU's anti-subsidy investigations have extended from steel to new energy vehicles; the Foreign Subsidies Regulation that took effect in 2025 requires all third-country companies operating in Europe to declare public subsidies, effectively creating a compliance wall. The Economic Security Strategy adopted by the European Parliament in 2026 brings supply chain resilience, technological sovereignty, and critical infrastructure protection into a unified framework. The cumulative effect of these measures far exceeds the simple diversification under the banner of "de-risking," approaching an institutionalized competitive defense mechanism.

However, the EU is not monolithic. Leaders of Germany, Finland, Ireland, and other countries visited China successively in early 2026, seeking pragmatic cooperation. German Chancellor Merz led a delegation of 30 business representatives, highlighting the concerns of Europe's manufacturing powers over the escalation of trade frictions. This contradiction shows that the EU's China policy is facing sustained tension between "strategic autonomy" and "economic interests," and different member states, based on their respective industrial structures, have significant differences in their definition of and tolerance for "risk."

III. Institutional Cooperation Frameworks Are Still Functioning, but Strategic Mutual Distrust Is DeepeningChina-EU relations are not solely about friction. The more than 70 dialogue and consultation mechanisms established over the past decades continued to operate in 2026. The China-EU Summit, the High-Level Strategic Dialogue, and the High-Level Economic and Trade Dialogue constitute the top-level communication framework, covering politics, economy and trade, science and technology, climate, and people-to-people exchanges. The July 2025 summit reaffirmed principles such as mutual respect, seeking common ground while shelving differences, and openness with mutual benefit, providing political guidance for subsequent interactions.

Nevertheless, the existence of mechanisms does not mean deepening trust. In the first half of 2026, China and Europe experienced a situation of "dialogue and confrontation running in parallel" across multiple fields: on the one hand, the two sides continued to coordinate on issues such as climate governance, global public health, and multilateralism; on the other hand, the EU's security reviews and restrictive measures continued to increase in sensitive technology areas such as telecommunications equipment, artificial intelligence, and semiconductors. Chinese telecom companies have built more than 70% of 5G infrastructure in some European countries; in discussions at the European Parliament, this figure is regarded as a "risk exposure" of technological dependence rather than a "cooperative achievement." This divergence in perspectives means that even in seemingly neutral digital cooperation, strategic mistrust is pervasive.

Visa facilitation and the recovery of people-to-people exchanges have provided a partial buffer. Twenty-five EU member states have implemented unilateral visa-free entry for holders of ordinary Chinese passports, and joint university programs and cultural exchanges have fully recovered. Although these "soft" linkages are hard-pressed to offset hard economic friction, they preserve social resilience for bilateral relations.

4. From "De-risking" to "Structural Recalibration": The Focus of Competition in the Next Five Years

Looking ahead, China-EU relations will enter a phase of "re-calibration." The EU's logic is no longer simple decoupling or pure risk management, but rather an attempt to construct a systematic "economic security resilience framework," whose core includes: strategic autonomy in key technology fields, diversification of supply chains, rule-based application of trade defense instruments, and the normalization of foreign investment reviews.

But this framework faces three major practical constraints. First, European companies' profit dependence on the Chinese market is deeply entrenched, especially in the German automobile and chemical industries; forced decoupling would generate value-chain restructuring costs of trillions of euros. Second, China's dominant position in the global green supply chain is difficult to replace in the short term with production capacity from India or Southeast Asia—this is especially true in areas such as power batteries, rare earth processing, and photovoltaic modules. Third, EU exports of services to China and intellectual property income continue to grow; these implicit gains make it arithmetically incomplete to simply define the problem by the goods trade deficit.

Therefore, future China-EU competition is likely to feature a "multi-track" character: in traditional manufactured goods, the EU will strengthen anti-dumping and countervailing enforcement; in green technology and digital services, the two sides may reach new market access commitments through negotiation; and in security-sensitive areas, restrictive measures will exist structurally. The China-EU Comprehensive Agreement on Investment, since negotiations began in 2013, has experienced more than a decade of ups and downs and remains frozen; whether it can be restarted will become a key litmus test for whether the two sides can reach consensus on competition rules.## V. Conclusion: The Complexity of Coexistence

China-EU relations can no longer be defined by a single label. They are neither "comprehensive confrontation" nor "unconditional cooperation," but a complex dynamic system filled with friction and coordination. For European companies, this means making more refined trade-offs between compliance costs and market share; for EU policymakers, it means finding a balance between the pressures of electoral politics and the real interests of European industry.

The policy trajectory in the second half of 2026 will be crucial. The new round of trade defense instruments that the EU is preparing, as well as whether China will impose retaliatory tariffs on European luxury cars, chemicals, and agricultural products, could push the relationship to new points of tension. However, historical experience suggests that the high complementarity between the Chinese and European economic ecosystems, along with their multi-tiered institutional linkages, makes it unlikely that the relationship will plunge into the abyss of complete decoupling. The real challenge lies in whether both sides can establish a set of fairer, more transparent, and more sustainable competition rules while avoiding a "new Cold War"—this is precisely the hope embodied in the "turning point," and also its greatest uncertainty.