China's trade surplus with the European Union rose to a new record, keeping the issue of growing imbalances at the top of the agenda as the bloc considers new measures to protect domestic industries.

As China's exports to the European Union hit a record high, its trade surplus with the bloc rose 27% year-on-year to $32.9 billion in June, according to Chinese customs data released Tuesday. China's surplus with Germany more than doubled year-on-year, while it narrowed by 81% with France.

Economists at Macquarie Group led by Larry Hu wrote in a report: 'Trade imbalances with the European Union continued to rise... Despite a three-month trade truce, the growing surplus keeps the risk of a trade conflict between China and the EU high.'

The unbalanced trade relationship is likely to fuel concerns in Europe over China's overcapacity in industrial production. Chinese exports have remained resilient despite weak domestic demand, helping to support growth at home but drawing complaints abroad that the influx of low-cost goods is squeezing local producers.

Tue, 14 2026

In the first half of the year, China imported goods worth $135.6 billion from the European Union, up 9% from a year earlier. In contrast, its exports during the same period reached $312.3 billion, up 17%.

European leaders are increasingly viewing the trade imbalance as a strategic challenge rather than just an economic issue.

French President Emmanuel Macron described the situation as a matter of 'life or death' for European industry after his visit to Beijing late last year.

In contrast, Chinese officials stressed the benefits of free trade and economic cooperation, pointing to opportunities to enhance European companies' access to the Chinese market.

Calls for dialogue on Chinese currency

German Chancellor Friedrich Merz on Monday called for a 'political dialogue on currency with China,' reviving the exchange rate of the Chinese currency as a source of Beijing's trade advantage.

Shreyas Gopal, strategist at Deutsche Bank, wrote in a report published Monday that the yuan is about 15% below its fair value against the euro, based on a range of indicators including purchasing power parity and external balances, compared with about 20% a year ago.

The Chinese currency has risen more than 6% against the euro since the start of the year, reaching last month its strongest level since March 2025. Despite this performance, the currency remains about 13% below its 2022 peak.

Mon, 13 2026

Both Chinese Commerce Minister Wang Wentao and Foreign Minister Wang Yi called for achieving an 'upward balance' in bilateral trade, stressing that the solution lies in strengthening economic cooperation rather than resorting to imposing restrictions.

Trade truce between Brussels and Beijing

Chinese and European sides have agreed to set a deadline ending in October to make progress in resolving trade disputes, according to European Trade Commissioner Maroš Šefčovič.

However, a wide gap remains between the two sides on how to address rising tensions. European policymakers continue to press Beijing to curb industrial overcapacity and reduce subsidies they say distort competition, while China has shown limited willingness to restrict its exports, which have become an increasingly important driver of its economic growth.

Tue, 14 2026

An analysis by Deutsche Bank showed that Germany suffers from a clear competitive weakness against China, based on the bank's estimates of the exchange rate level at which the former German currency, the mark, would trade if it still existed.

Gopal wrote: 'Almost all our models indicate that the yuan's depreciation against a hypothetical German mark appears more pronounced than against the euro, reflecting that the competitiveness challenge facing Germany is more severe than in the euro area as a whole.'