Talks will focus on the €1 billion daily deficit and rare earth export restrictions.

European Trade Commissioner Maros Sefcovic has arrived in Beijing for talks on the European Union’s (EU) growing trade deficit with China.

Sefcovic will meet Chinese Commerce Minister Wang Wentao on Thursday and Friday after months of discussions over the EU’s trade deficit of more than €1bn ($1.12bn) daily, as well as Chinese curbs on exports of rare earths and other critical minerals.

Meanwhile, Chinese companies are increasingly challenging Europe’s top car brands. China rejected the EU request for voluntary curbs on Chinese hybrid car exports as the two sides enter negotiations, the Financial Times reported on Wednesday. The European Commission now hopes to get Beijing to accept a unilateral EU measure to cap hybrid imports instead, the outlet said, citing two diplomats briefed on the plan.

The two days of discussions come just as a majority of EU lawmakers called for a more assertive trade policy towards Beijing in a non-binding resolution on Wednesday. China vowed a “resolute response” to safeguard its industries if the European Union goes ahead with restrictions against Chinese companies or products, according to its commerce ministry.

Germany and France propose rapid EU measure

French President Emmanuel Macron and German Chancellor Friedrich Merz, leaders of the bloc’s two biggest powers, on Tuesday urged the EU to prepare a “credible instrument” that could be quickly activated to strike back against countries that harm the bloc economically.

The new measure would not target any specific country. German officials said the EU needed a tool as powerful as the Section 301 tariffs imposed by the United States or China’s restrictions on critical-mineral exports.

The proposed weapon – to be discussed at an EU leaders’ summit next week – would give the European Commission the power to respond to a trade aggression within days.

China responded to the letter by urging Paris and Berlin to steer clear of “protectionist” measures.

“We hope that France and Germany, as major economies in the world, will uphold openness, cooperation and free trade,” the commerce ministry said in a statement.

“They should avoid going down the wrong path in the wrong way, only to ultimately suffer the consequences themselves.”

G20 finance leaders, except China’s, agreed in September to act against “non-market” distortions that exacerbate imbalances. Beijing says that hyping up issues such as economic imbalances and overcapacity is a form of protectionism designed to exert pressure on and restrict China.

Ongoing trade talks

EU and Chinese officials have been discussing trade imbalances since June. Sefcovic said he wanted “tangible results by October” as well as some form of commitment that can be put to EU leaders meeting in Brussels.

Trade relations with China top the summit’s agenda next week, as ballooning debt has prompted auditors to warn about the next seven-year EU budget and has spurred protests in France.

European Commission President Ursula von der Leyen told the European Parliament last month that the trade imbalance had reached a tipping point and that Europe would use every tool at its disposal to rebalance the relationship.