China-EU's path to prosperity is partnership

As two of the world's largest economies, China and the European Union wield significant global influence. A balanced economic relationship between these two heavyweights is not only in the interests of both sides but also for the world.

However, public debate in Europe is often dominated by the bilateral trade deficit in goods. Eurostat reports that in 2025 the European Union imported goods worth about 559 billion euros ($628 billion) from China and exported goods worth about 200 billion euros to China, leaving a deficit of roughly 360 billion euros.

Such a huge gap deserves attention. But focusing solely on this figure overlooks the fact that the bilateral relationship is more than just trade in goods.

Services, foreign direct investment, local production and the activities of thousands of companies also matter.

This broader perspective is essential when assessing China-EU economic ties.

Take Germany, for example. Renowned for its service exports, German companies have built a deep presence in China; around 5,000 German companies operate in China, with about two-thirds engaged in manufacturing and roughly 80 percent classified as small and medium-sized enterprises.

German companies' direct investment in China increased by around 5.6 billion euros in the first six months of the year, about one-third more compared with the same period last year, according to analyses by the German Economic Institute.

In 2025, Chinese companies launched 228 investment projects in Germany, up 14.6 percent year-on-year, making China the largest source of foreign investment projects in Germany.

Chinese investment in Germany was mainly concentrated in fields such as electronics and automation, transport and logistics, energy and raw materials, and digitalization.

These figures illustrate why economic balance should be seen through a broader lens than trade statistics alone.

Balance is vital, because a trading relationship thrives when both sides see it as mutually beneficial. Large and persistent imbalances fuel protectionist pressures. Europe has already imposed additional tariffs in certain sectors. But protectionism cannot resolve structural challenges.

A more constructive approach is to encourage greater two-way investment, expand market opportunities and deepen corporate integration.

The US-Japan experience of the 1980s is instructive. Japanese cars dominated the US market, but political US pressure led to Japan voluntarily restraining exports to 1.68 million vehicles a year. The lesson is not that successful exporters should curb competitiveness or that countries should raise barriers. Globalization works best when economic success is accompanied by investment, job creation and deeper participation in local economies, ensuring the benefits of globalization are widely shared.

For Chinese manufacturers, complementing exports with foreign direct investment is a logical strategy. Producing in Europe mitigates tariff risks, shortens supply chains and embeds Chinese companies deeper into European economies.

This shift is already underway. BYD is setting up car production in Hungary while CATL is expanding its battery production in Germany, Hungary and Spain. Geely's ownership of Volvo Cars exemplifies long-term integration, with Volvo's Belgian plant remaining a vital European base.

When I met with around 100 Chinese automotive suppliers, many expressed plans to establish manufacturing operations in the EU — a promising development that reflects the evolution of globalization. This can be a two-way learning process. China and Europe have distinct strengths and much to learn from each other.

An outstanding Chinese strength is speed: the ability to transform research results and new technologies into marketable products quickly and at scale.

In sectors such as electric vehicles, batteries, solar technologies and digital applications, Chinese companies excel in commercializing innovation. European companies can learn from this speed, pragmatism and the close link between R&D and market launch.

European companies, in turn, offer valuable insights into international presence. Many have built dense networks of subsidiaries, sales organizations, service units and production sites worldwide.

Over time, these became local companies in foreign markets.

Chinese companies are following suit, though many can still expand their international footprint.

As more Chinese companies invest, employ people, conduct research and build supply chains overseas, their relationship with international markets will deepen and strengthen.

Another European forte is global branding. Interbrand's Best Global Brands 2025 lists 37 European brands among the top 100. While Chinese companies excel in technology, manufacturing and cost competitiveness, only three Chinese brands — Xiaomi, BYD and Huawei — appear in Interbrand's 2025 ranking. A strong global brand transcends price competition, fosters consumer trust and supports sustainable profitability.

The next phase of China-EU economic relations should not be a binary choice between exports and protection. A better model is one of rebalancing and deeper integration: trade alongside investment, exports alongside local production, and competition alongside cooperation.

Europe should remain open to productive Chinese investments that create jobs, innovation and value added.

Chinese companies, for their part, can increasingly view Europe not only as an export market but also as a base for manufacturing, research and brand-building. China and Europe have reaped immense benefits from globalization. Their task now is not to retreat, but to adapt to a new phase.

The goal need not be perfect symmetry in every trade statistic. It should be a sustainable balance of interests and opportunities.

By keeping markets open, investing in each other's economies and learning from each other's strengths, China and the EU can ensure that China-EU ties continue to drive growth and innovation for decades.

The author is one of Germany's most influential business thinkers, and founder and honorary chairman of Simon-Kucher.

The views don't necessarily reflect those of China Daily.