China overtakes US as Europe’s main trading partner for first time

China dethroned the United States and became the European Union’s biggest trading partner last year, new figures reveal.

Despite the economic impact of the coronavirus pandemic, trade between the EU and China grew markedly but imports and exports to the US plunged, showed data from Eurostat, the EU’s statistics agency.

“In the year 2020, China was the main partner for the EU. This result was due to an increase of imports (+5.6%) and exports (+2.2%),” the EU’s statistical office said. “At the same time trade with the United States recorded a significant drop in both imports (-13.2%) and exports (-8.2%).”

“The reason behind it is clearly the fact that China/Asia is the only region going through a nice V-shaped recovery,” ING Germany economist Carsten Brzeski told CNBC on Tuesday.

China suffered from the pandemic during the first quarter, but recovered vigorously with consumption even exceeding its level of a year ago at the end of 2020.

This helped increase sales of European products, particularly in the automobile and luxury goods sectors, whereas China's exports to the bloc benefited from strong demand for medical equipment and electronics.

According to Eurostat, the trade volume with China reached 586 billion euros ($711 billion) in 2020, in comparison to 555 billion euros (S$890 billion) for the United States.

This comes as the China and EU are planning to further improve trade relations through an investment deal announced in principle on December 30, after years of negotiations.

Europe finalizes major investment deal with China despite US concerns

Europe has finalized an investment agreement with China that is designed to rebalance trade with the world

China is likely to register the second-highest growth rate globally in 2021, forecasts from the International Monetary Fund show.

“Looking ahead, the importance China has for European trade is also a clear dilemma,” Brzeski said, adding that “Europe will have a hard time making choices” between trading with China and helping the US on the technology front.

US President Joe Biden said his administration was ready for “extreme competition” with China but with a different approach than what used by the administration of his predecessor Donald Trump.

“I’m not going to do it the way Trump did. We are going to focus on the international rules of the road,” Biden told in a CBS interview clip published on Feb. 7.

“We need not have a conflict but there is going to be extreme competition,” Biden added.

China calls on US to ‘correct’ mistakes, uphold mutual respect

China has blamed the US for plunging bilateral relations, calling on the new administration to rectify past mistakes and promote mutual respect.

Ties between Washington and Beijing under Trump turned fractious, with clashes on issues relating to trade, technology, regional security and human rights and the coronavirus.

However, Chinese officials have expressed cautious optimism that bilateral relations would improve under the Biden administration.

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