The evolving EU-China geoeconomic relationship

In this seminar, Schularick discussed the shifting dynamics in EU–China relations, arguing that globalisation is no longer just an engine of prosperity and peace, but also a domain of strategic competition, economic asymmetries, and political risk. Schularick highlighted three key friction points in the current relationship:

• Currency and Trade Imbalance: The decreasing value of China’s real effective exchange rate has boosted Chinese exports and current account surplus. This has led to concerns in Europe due to China’s already strong trade performance and current account position.
• Manufacturing Overcapacity: Massive investment in Chinese manufacturing has led to a global supply glut. Excess production is being exported, allowing Chinese firms to gain market share, supported by macroeconomic policies that distort global trade.
• Uneven Playing Field: China’s industrial subsidies—amounting to 1.7% of GDP—far exceed those of other major economies. Schularick argued that given China’s leadership in many advanced sectors, the EU can no longer tolerate such distortive policies without undermining its own competitiveness.

Schularick argued that decoupling and de-risking from China would impose economic costs on all sides. Instead, he advocated for a strategic openness—preserving the EU’s commitment to trade while safeguarding key industries, diversifying critical dependencies, and reinforcing economic sovereignty.

Despite rising tensions, Schularick emphasized the potential for EU-China cooperation in upholding a rules-based trading regime and expanding investment ties, while noting that progress also depends on China’s support towards Russia.