A bleak picture for European exports to China
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What is the main topic discussed in this episode?
Breakfast Business with Enterprise Ireland on Newstalk.
What has changed in European exports to China?
It's not that long ago when China was the second most popular destination for European goods, from cars to machinery, technology to luxury goods. But things have shifted against Europe since then. With the exception of luxury goods, China is increasingly offering viable and in some cases better versions of cars, machinery and technology than we export from the EU. So are we in deep trouble now or could China leverage our need to sell to it for geopolitical reasons? Robin Harding is the Asia editor with the Financial Times, and he wrote a controversial piece last week in which he painted a bleak picture for European exports to China. He joins us now from Hong Kong. Good morning, Robin. Morning, Joe.
Now, the most stark line in your piece, Robin, in the FT last week was that there is nothing that China needs to import from Europe anymore. Nothing that it can't make itself. Worrying.
Yes. So I wrote this piece after coming back from a trip to China. And while I was there, I spoke with lots of economists, policy people, chief executives. And I put this one question to them. I said, trade is a two way thing. You sell to us. We sell to you. So what is it in the future that China would like to buy from the rest of the world?
Why is China less reliant on European imports now?
And this question really kind of stumped people. They quite clearly didn't know what to say. They said, well, we need to buy iron ore and we need to buy soybeans. But that's not much use if you're a European. We like Louis Vuitton handbags. Yes, we like higher education. We like to send students off to the US and the UK and Ireland to study. But when you consider the scale of China's trade, Is that going to provide an adequate living and just the ability on our side to keep buying from China if there's really nothing we have to sell to China anymore? So that was the point of the piece. It was really to put that question. And I have to say, I still haven't heard a good answer to it.
I just wonder whether this predates the Trump tariffs and the protectionism that we're seeing from the other side of the Atlantic, i.e. that the Chinese have been deglobalizing for, you know, maybe at least five years.
I think that's right. I mean, I think there's three things that have changed. One is that China is really moving up the value chain. So the old image of China as it makes cheap clothes, toys, shoes, that is really, really out of date. China now makes the world's best cars. It makes the world's best industrial robotics. They have an increasingly strong semiconductor industry. So it's moved up the value chain and it now makes the same things that Europe used to do a great business selling to China. So that's one thing that's changed. The second thing is related to the Trump tariffs and things, but China now has a real national security focus. And their view is we cannot afford to be dependent on foreigners for any sophisticated product.
We need to make it all ourselves.
What challenges do European exporters face in the current market?
And then the third thing that's changed is that post-COVID, China's domestic economy hasn't been doing that well. They've had a big real estate problem. We know all about real estate problems in the UK and Ireland. But they've had a big one of their own. And as a result, instead of being able to sell in the Chinese market, there's this huge pressure to go abroad. And all of these amazingly competitive Chinese exports pouring onto world markets. So it is a very, very difficult situation these days for European industrial exporters.
So what do they do? Now, you've already hinted that the Chinese still like importing our very expensive luxury products, Gucci or Louis Vuitton or whatever it is. But for those nations like ours that are heavily dependent on exports, what should we do if we want to sell to the Middle Kingdom?
I don't think it's going to be possible unless China changes direction. I just don't see how it's going to be possible to be competitive producing in Europe for the Chinese market. And what you see is that big European companies like Volkswagen
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