China has never exported as much as it does now, and its trade surplus has never been higher. At the same time, its economic growth is slowing, held back by weak domestic demand. The imbalances in China’s growth model, and the external imbalances they give rise to, are therefore continuing to worsen. With Europe taking a tougher line and the US, with which China shares nothing more than ‘strategic stability’, the standoff looks set to continue. The European Union and China would have a great deal to lose from a lasting deterioration in their relationship.
