China and the European Union have reached an understanding that could reduce Chinese exports of hybrid and plug-in hybrid cars to the bloc by more than half over four years, as both sides seek to address growing trade tensions and improve market access.
European Trade Commissioner Maros Sefcovic announced the development on Friday after two days of talks with Chinese officials in Beijing, including Commerce Minister Wang Wentao. According to Reuters, the agreement envisages reducing shipments by several million vehicles over four years, although the two sides have yet to detail how the arrangement will be implemented.
The understanding marks a potential step towards easing a trade dispute that has strained relations between Beijing and Brussels for years, particularly over China's growing exports of automobiles and other manufactured goods.
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"I came here with one clear purpose: to start rebalancing the EU-China trade relationship and to make sure this first phase of negotiations under the trade and investment consultations delivers its first tangible outcomes," Sefcovic said at a press briefing, as reported by Reuters.
The EU's trade deficit with China exceeded €1 billion ($1.12 billion) a day in 2025, according to European Union data. Chinese goods shipments to the bloc rose to $560 billion last year from $517 billion in 2024, while China's imports of European goods declined slightly to $268.3 billion from $269.4 billion.
Reuters reported that the European officials have raised concerns about the rapid increase in Chinese vehicle imports. Imports of plug-in hybrid cars into the EU rose 86% in the year to September, while prices declined 20%. More than half of these vehicles now come from China.
The European Union has also been investigating Chinese electric vehicle subsidies, with the dispute extending beyond automobiles to sectors including brandy, pork and dairy products.
As part of Friday's understanding, China and the EU agreed to continue discussions on price undertakings and review procedures linked to the bloc's anti-subsidy investigation into Chinese electric vehicles.
The discussions also covered access for European products in China and the approval of Chinese export licences for rare earths and permanent magnets.
China's commerce ministry said it would continue facilitating licence approvals through a "green channel" mechanism. These materials are crucial to several industrial supply chains, including electric vehicles and advanced manufacturing.
The two sides also agreed to explore possible tariff reductions on certain goods within World Trade Organization rules and continue discussions on market access for medical devices.
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China has argued that it is a partner in addressing Europe's economic challenges, rather than the source of its problems, according to its commerce ministry.
European Commission President Ursula von der Leyen warned last month that the bloc's widening trade imbalance had reached a tipping point, signalling that the EU could deploy available policy tools to rebalance economic ties.
Reuters reported that China and the EU will maintain dialogue, including a ministerial-level video conference in January 2027. Their third regular consultation meeting is scheduled for March 2027.
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