EU-China trade tensions escalate over surplus and subsidy dispute

The European Union and China remain locked in a trade dispute that shows no sign of easing, despite three months of talks agreed in June. New figures for July show China's trade surplus with the EU widening again, while Beijing has ordered its companies to refuse to hand over commercially sensitive information to EU investigators probing a major Chinese takeover in Germany.

According to the latest data, China extended its trade surplus with all but three EU countries in July compared with the same month a year earlier. The surplus with Sweden was four times larger, while Malta, Romania and Finland saw increases of 166%, 94% and 93% respectively. Looked at from the other side, Germany's deficit with China grew by 86% and Poland's by 31%.

The European Union has accused Beijing of subsidising exports and flooding European markets with cheap goods. In June, the two sides gave themselves three months to try to avoid a trade war. But those talks appear to have made little progress. One BBC correspondent said that, unless something secret was happening behind closed doors, the figures showed the situation was deteriorating.

Part of the problem is that while the EU has managed to reduce imports of some lower value goods by imposing taxes, the picture is very different further up the value chain. Exports of Chinese electric vehicles surged in July: up 365% to France, 530% to the Netherlands, 618% to Hungary, 329% to Spain, and even in Germany, a powerhouse of the automotive industry, they rose by 40%. Hybrid exports also increased.

The dispute has also spilled over into the EU's foreign subsidies rules. Brussels is investigating JD.com, China's largest retailer, over its proposed 2 billion euro takeover of Ceconomy, the German parent company of MediaMarkt. But Beijing has instructed Chinese companies not to hand over the sort of financial information EU officials have requested. The Chinese government says the investigation is being used to suppress Chinese companies wanting to export to Europe. It has questioned why information from Chinese banks should be provided to EU investigators.

Many analysts side with China on the broader question of electric vehicles. They argue that European, Japanese, American and South Korean carmakers dropped the ball on EVs. China ramped up production years ago with huge government incentives, making its vehicles cheaper and better. The result is that Chinese EVs are now competitive and are expanding overseas. The fault, these analysts say, lies with European car companies that treated EVs as a distant prospect rather than a present reality.