appConfigEntityId

bodyType

customContents

entityId

entityUuid

isVideo

articlePageQuery

article

articleSchemaContent

content

hooksArticlePageAdvertisementConfigArticle

hooksArticlePageFloatingButtonConfigArticle

appConfig

filter

json

liveArticle

Alex Lo

Leaders of the G7 rich nations might have gone into this month’s summit in France hoping for a united front against China. But, overshadowed by the conflicts in Iran and Ukraine and alienated by a mercurial US President Donald Trump, the lacklustre gathering came up short.
There was no public agreement on how to address the so-called China shock 2.0, the supposed overcapacity issues and currency manipulation that is considered to be the cause of Chinese exports flooding into Europe.
Instead of declaring a joint plan, as the French hosts had initially hoped, milder summit statements called for Group of Seven cooperation to reduce dependence on foreign supply of critical minerals and to support “balanced, durable and resilient growth’’ against “global imbalances”. China was not named, though it was clearly the target.
The European Union (EU) itself is an unenumerated member of the G7. A European consensus seems to have been reached: China is the root of their economic problems. The evidence? China’s trade surplus reached US$1.19 trillion last year. In the first five months of 2026, shipments to Germany increased by 17.3 per cent year on year. Meanwhile, according to Chinese customs data, imports from Germany rose just 1.5 per cent.
So the EU is crying foul and making threats. But if the US failed to reverse China shock 1.0 during Trump’s first term, it seems doubtful a much-weakened EU or even the G7 would fare any better this time.
Speaking after a European Council summit in Brussels last week, German Chancellor Friedrich Merz said he strongly supported a tough EU stance against China. Not content with accusing China of dumping goods on the European market because of overcapacity, he now claims the yuan is undervalued by a whopping 30 per cent. Even the International Monetary Fund estimated an undervaluation of only 15 to 16 per cent.

Merz pointed to something like the 1985 Plaza Accord as an example of how to address the problem. From a Chinese or Asian perspective, the accord is probably the worst example he could cite.
Back then, under intense pressure from the Ronald Reagan White House, both former West Germany and Japan agreed to appreciate their currencies to weaken the historically strong US dollar – ostensibly to rebalance trade.
The outcome would prove catastrophic for Japan, creating the worst asset bubble in the country’s post-war history. The bubble’s bursting ushered in Japan’s “lost decades”, marked by extreme deflation from which it only recently emerged.
Fellow German hardliner Ursula von der Leyen, the European Commission president, is on the same page as Merz. According to her, a 45 per cent increase in Chinese shipments to the bloc last year was “simply not sustainable”.

“I’m pleased we saw clear support for a European response based on unity among member states,” she said.
In reality, those problems lie with Europe, not China. By cutting off cheap Russian energy supplies and effectively deindustrialising, the major European economies, especially Germany, have become uncompetitive. This is especially evident in high-value fields such as electric vehicles (EVs), batteries, solar power, wind turbines and advanced materials – key features of the 21st-century economy. Because of foresight and planning, China has come to dominate them. European complaints sound like sour grapes, or worse.
Ironically, in a private exchange at the G7 meeting, Canadian Prime Minister Mark Carney and Trump reportedly agreed that allowing a small number of Chinese-made EVs into Canada at a lower tariff rate was a good thing.
If European consumers don’t want to purchase Chinese products such as EVs, Beijing can’t force them. But when advanced economies do that, it’s called innovation or comparative advantage. When China does it, it’s overcapacity, dumping and currency manipulation.


European Central Bank chief Christine Lagarde was more realistic. She stated the obvious: the 1985 deal was struck when “times were different”, and that “we are now in a vastly different situation”. She said, wisely, that any talks on trade imbalances and currency adjustment should include Beijing. China today is not Japan in the 1980s, and the EU is most certainly not the US.
While European leaders might want to continue their blame game, they must realise they have far less bargaining power and leverage than before. Rather than resorting to threats, they would be better off cooperating with China to reach an amiable trade deal.


Former WTO head Pascal Lamy on the EU’s China choice: get a rebalance, or go protectionist

Trump claims US Greenland security deal, China reportedly among adversaries being kept out

Are the doors to German universities closing for China’s STEM researchers?

Pascal Lamy says Europe at ‘moment of truth’ on China trade

China-EU relations

Europe wants a new Plaza Accord for China – seriously?

European Council President Antonio Costa (second left) walks with German Chancellor Friedrich Merz amid discussions on the EU budget for 2028, in Brussels, Belgium, on June 19. Photo: dpa

Then US Treasury secretary James Baker speaks to reporters at New York’s Plaza Hotel on September 22, 1985, as France, West Germany, Japan, the US and the United Kingdom sign the Plaza Accord, a deal to depreciate the US dollar in relation to the Japanese and German currencies. Photo: AP

BYD electric cars are parked for a presentation event in Berlin, Germany, on May 21, 2025. Photo: Reuters

Anxious West seeks to rewrite global trade rules to counter China

Illustration: Craig Stephens

European Central Bank’s President Lagarde urges talks on yuan undervaluation

Christine Lagarde, President of the European Central Bank (ECB). Photo: EPA

Europe rallies around tough new China strategy ahead of key summit

French President Emmanuel Macron is calling for a European “Section 301 tool” to prevent Chinese-driven deindustrialisation in the EU. Photo: WPA

German Chancellor Friedrich Merz at the Forbidden City in Beijing during his trip to China in February. Photo: dpa

Germany backs EU’s tough China line with call for ‘Plaza Accord’ talks on yuan

Belgian Prime Minister Bart De Wever (left) and Spanish Prime Minister Pedro Sanchez attend a European Council summit in Brussels, Belgium, on Friday. Photo: EPA

EU threat of trade war against China is a strategic farce

Chinese-made electric cars awaiting export are seen parked at the International Automobile Trade Port in Hangzhou in China’s eastern Zhejiang province. Photo: AFP

European Commissioner for Trade and Economic Security Maros Sefcovic speaks to the media as he arrives to attend a meeting of G7 trade ministers in Paris, France, on May 6.  Photo: EPA

Opinion

China Opinion

World Opinion

News

World

Europe

United States & Canada

China

Economy

Global Economy

Policy

Instead of hoping for Beijing to commit economic suicide, it would be more realistic for the EU to strike a mutually acceptable trade deal


Instead of hoping for Beijing to commit economic suicide, it would be more realistic for the EU to strike a mutually acceptable trade deal.


European Union

International Monetary Fund (IMF)

China trade

Trade

European Central Bank

China economy

Electric & new energy vehicles

France

Germany

Diplomacy

China exports

Ursula von der Leyen

Energy

Automotive industry

China manufacturing

Japan

European Council

Currencies

Friedrich Merz

Expresses the views, ideas and conclusions of the author. (Eg. Enough of Crazy Rich Asians, think of crazy poor Hongkongers.)


Column

As I see it

Europe wants a new Plaza Accord for China – seriously?

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Instead of hoping for Beijing to commit economic suicide, it would be more realistic for the EU to strike a mutually acceptable trade deal

Instead of hoping for Beijing to commit economic suicide, it would be more realistic for the EU to strike a mutually acceptable trade deal