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2009-05-28 | All chapters

China’s Export of Overcapacity May Hurt Trade Relations With EU
Kevin Hamlin, Bloomberg, 27th May 2009

China may face a surge in anti- dumping cases from European companies next year that may worsen trade frictions, according to the European Union Chamber of Commerce in China.

Anti-dumping cases may accelerate in 2010 because Europe’s economic slump deepened late last year and the bloc’s regulations require companies to show their businesses have been injured by dumped products over the course of an entire year, Jorg Wuttke, the president of the chamber, said in Beijing today.

"That means in 2010 we probably could expect a hike in dumping cases against foreign importers into Europe and primarily of course that would hit China,” Wuttke said. That “might spoil the atmosphere between Europe and China,” he said.

While the 27-nation EU is China’s main trading partner and China is the bloc’s second-biggest, European frustration over trade barriers and counterfeiting in China have strained relations. Trade volume between the two countries grew to more than 326 billion euros ($455 billion) last year, according to the European Commission, the EU’s executive arm.

The core of the problem is China’s industrial overcapacity, Wuttke said. China’s 4 trillion yuan ($586 billion) stimulus plan may exacerbate the issue because of “quick-fix investments” in certain domestic industries, the chamber said in a statement.

"This overcapacity would in turn create a trend towards aggressive exporting,” the statement said. “At a time when global demand is contracting, this can create a tendency towards trade protection in otherwise open markets and thus should be avoided.”

While China has exported much of this overcapacity to the West, the global recession is now slashing demand for foreign products in the U.S., Europe and Japan, Wuttke said.

Many Chinese companies are “in dire straits” and the government is struggling to keep them “afloat with all kinds of subsidies,” Wuttke said. “The subsidies are a bit of a worry because these exports then go even stronger into our markets, challenging the industrial landscape in Europe, causing trade frictions.”

Source: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aAcC_6ck9npM