EU’s von der Leyen echoes Yellen’s calls for tough stance on Chinese overcapacity

European Commission chief Ursula von der Leyen on Tuesday said that Europe must talk tough with China on its perceived unfair trade practices, echoing calls a day earlier from U.S. Treasury Secretary Janet Yellen.

Speaking ahead of German Chancellor Olaf Scholz’s trip to Beijing later this week, von der Leyen said European companies should have the same market access in China as Chinese firms have in Europe, according to comments cited by Reuters.

She also urged the German leader to take a hard stance with Chinese authorities about overcapacity and unfair competitive practices.

It comes after Yellen on Monday told CNBC she would not rule out any U.S. measures, including potential tariffs, against, China amid concerns that Beijing is intentionally flooding international markets with cheap green energy products.

“I wouldn’t rule out anything out at this point. We need to keep everything on the table. We want to work with the Chinese to see if we can find a solution,” she said in an interview with CNBC’s Sara Eisen.

Chinese overcapacity has become a major point of diplomatic tension, with the U.S. and its allies contesting that excess production and subsidized goods from China are undercutting domestic businesses.

China, for its part, denies the claims, with China’s Minister of Commerce Wang Wentao saying Monday that the rise of China’s green technology industry — which includes electric vehicles (EV), solar panels and lithium-ion batteries — is the result of “constant innovations,” according to his ministry.

It also contests that the U.S. — through initiatives such as the Inflation Reduction Act — is subsidizing its own manufacturing industry.

Treasury Secretary Yellen on Monday said that other countries may explore the possibility of imposing trade restrictions on China if an understanding could not be reached.

The European Union has so far resisted implementing such measures, given its strong trade ties with the world’s second-largest economy. 

Berlin, in particular, has been reluctant to slap tariffs on Beijing’s EV industry for fears of retaliation on its own sizable automotive industry — a key avenue of German exports to China.

Speaking on Monday ahead of his three-day trip to China, Chancellor Scholz said he was skeptical about the need for such tariffs, a spokesperson said, according to Reuters. That is despite a wider ongoing EU probe into “dumping” of subsidized Chinese EVs into Europe.

Scholz is due to arrive in China on Sunday for a visit that will include a meeting with Chinese President Xi Jinping and Premier Li Qiang. He will be joined by three ministers and several executives from the business community, according to media reports.

The visit is Scholz’ second since becoming chancellor and his first since November 2022.