In the week of 15 June, EU foreign affairs ministers will discuss the state of play of relations between the EU and China. They will have some appalling data on the table. Beijing has just published a brutal trade scorecard.
In Jan-May 2026, China exported US$254bn of goods to the EU and imported US$110bn from it. The resulting US$144bn surplus is the highest in the 2021-2026 GACC series shown here, and already 2.3 times the Jan-May 2021 level.
The imbalance is widening from both sides. China’s exports to the EU are up 34% compared with Jan-May 2021. China’s imports from the EU are down 13%.
That is the uncomfortable part for the EU. This is not just a story of stronger Chinese sales into the EU market. It is also a story of weaker EU sales into China.
In our view, the EU cannot afford to tiptoe around this reality. Looking away from these numbers would not be caution. It would be denial, and a very costly one.
China’s exports to the EU are not just recovering from the post-COVID disruption. In Jan-May 2026, they reached US$254bn, the highest level in the 2021-2026 GACC series. Compared with Jan-May 2021, China is now selling roughly one third more to the EU, while its purchases from the EU remain below their 2021 level.
In Jan-May 2026, China imported US$110bn of goods from the EU, compared with US$127bn in Jan-May 2021. That is the weaker side of the scorecard, while China is selling much more to the EU than in 2021, it is still buying less from it.
The political signal is hard to miss. As China’s sales to the U.S. weaken, its exports to the EU are reaching new highs. That is the EU’s reality check. It is discussing China policy while becoming an even larger outlet for China’s export machine. Annualising the Jan-May gap, China would export almost US$200bn more to the EU than to the U.S. in 2026.
Over the twelve months to May 2026, the surplus reached about US$1.18tn. Annualising the Jan-May 2026 figure gives US$1.09tn, lower than the rolling twelve-month total but still comfortably above US$1tn.
The monthly pattern is volatile, especially around the Lunar New Year period, but the broader signal is not volatile. China’s external surplus remains structurally enormous.
We started with a customs anomaly. EU imports from China under HS29339980 suddenly became enormous in value, but not in volume.
This code is important because it is not a named product. It is a residual customs bucket for “other” nitrogen heterocyclic compounds. In plain English, several different chemicals can sit inside the same line. That is why the code can show a huge trade signal without revealing the exact molecule.
The anomaly is not about kilos. It is about euros. Italy’s share of EU quantity stayed around 9-12% for years. But its share of EU value jumped from 15% in 2021 to 77% in 2025.
Before Italy became the main value node, Slovenia played that role. Slovenia accounted for 65% of EU value in 2021 and more than half in 2023, with only small shares of volume. Then the high-value flow shifted toward Italy.
This does not look like ordinary bulk chemistry. A small share of kilos carries most of the euros. That points to high-value pharma, fine chemicals, APIs or late-stage intermediates.
Italian sources describe a parallel phenomenon in plain language. They say pharmaceutical imports from China surged, especially active ingredients and pharmacological components linked to the Florence and Tuscany pharma system.
We do not know the exact chemical from CN8 data. But the trade signal is not vague. This is expensive, concentrated and pharma-adjacent.
The EU dependency is not visible in tonnes. It is visible in value.
The strongest pointers lie within the tirzepatide supply chain, a key driver in the weight management sector.
The warning came a decade ago. China effectively shut the door on exports of raw tungsten ores. The West noticed, but did not rebuild independent supply chains. Refining capacity was allowed to wither.
Tungsten hexafluoride starts with tungsten, but its strategic value comes much later in the chain. It is a critical process gas used in advanced semiconductor manufacturing, including high-bandwidth memory and leading-edge chips.
For years, the supply flowed. Then, in February 2025, China placed several tungsten-related materials and technologies under export control. Tungsten hexafluoride is not explicitly mentioned in the notice but is captured by omnibus catch-all provisions regarding tungsten.
One year later, in Jan-Feb 2026, China exported about 64 tonnes of tungsten hexafluoride, down 39% year on year. That makes the customs signal worth watching.
For the EU, the problem is structural. Spain holds Western Europe’s largest raw tungsten reserves, but the EU appears to lack the chemical capacity to turn those minerals into ultra-pure tungsten hexafluoride gas.
China’s surplus is not only a Western problem. It also runs through much of the developing world. Beijing’s “Global South” language often sounds horizontal, supportive and based on solidarity. The trade balance looks much more hierarchical. China sells manufactured goods at scale to many developing economies, while buying heavily from a narrower group of commodity and technology suppliers.
Most of China trade is general trade. But there are other channels.
Goods can enter bonded zones, be used as inputs for processing, move through customs-supervised areas, or be part of supply-chain operations where China is one stage in a wider production system. These are not marginal flows. They are a large part of China’s trade machine.
In Jan-May 2026, general trade was still the majority of China’s goods trade. But its share fell clearly compared with Jan-May 2025. General trade fell from 64.2% to 60.3% of total trade. For exports, it fell from 66.0% to 63.7%. For imports, the drop was sharper, from 61.5% to 55.6%.
The fastest growth is not coming from ordinary general trade. It is coming from processing trade, bonded areas and other customs-supervised channels. This is especially visible on the import side. General trade imports rose 12.5% year on year, while imports through the other channels rose 43.7%.
So the import recovery needs to be read carefully. Stronger imports are usually taken as a sign of stronger domestic demand. But here, a large part of the growth is coming through channels linked to inputs, processing, bonded logistics and production chains. That makes it harder to read the import rebound as a simple story of Chinese households or companies buying more for domestic use.
The conclusion is not that general trade is weak. It is still the core of China’s trade and the main source of the surplus.
The point is more subtle. China’s trade rebound is not just larger. It is becoming more supply-chain heavy.
In Jan-May, China’s exports of electronic integrated circuits rose 90% by value. That sounds like a spectacular export boom. But the number of units exported rose by only 8.7%.
Imports tell a similar story. China’s imports of electronic integrated circuits rose 52% by value, while import quantity increased by only 8.5%.
The latest monthly data makes the divergence sharper. In May alone, China’s integrated-circuit exports rose 111% by value, but only 2% by volume. Imports rose 68% by value, even though import volume actually fell by 1%.
A higher export value does not automatically mean a large net gain for China’s economy. If exporters earn more, but manufacturers also pay much more for imported chips and semiconductor inputs, part of the gain is offset. The export side looks impressive, but the import side shows that China’s manufacturing system is still paying a high cost for key inputs.
This should not come as a surprise. China’s own policy documents have been pointing in this direction for some time. The leadership knows that semiconductor self-reliance is not achieved by declaration. It takes time, especially at the most advanced end of the chain, where equipment, materials, design tools and manufacturing know-how still matter.
That is why the July 2024 Third Plenum stressed technological upgrading and self-reliance. The 15th Five-Year Plan goes further. It does not treat semiconductors as a solved problem. It treats them as a strategic priority.
The trade data fits the policy story. China is moving up in semiconductor trade, but it is still paying heavily for imported chips and inputs.
There is also a second side to the strategy. Where catching up at the frontier is slow, China can scale faster in mature, or legacy chips. These are the cheaper, less advanced semiconductors used in cars, appliances, industrial equipment, power systems and everyday electronics.
These are not the same kind of choke points. For China, the pressure is at the advanced end of the chain. For the West, the risk is further down the value chain, in mature chips that are less glamorous but widely used.
Advanced chips remain a choke point for China. Mature chips may become a dependency risk for the West.
Last week, Xi Jinping travelled to Pyongyang for a meeting with Kim Jong Un. While analysts and think-tanks focused on the broader geopolitical implications, we used the moment to look at the trade relationship.
The chart shows the devastating impact of the 2017 U.N. sanctions. North Korea’s exports to China collapsed after the restrictions, especially after coal, iron, iron ore, lead, lead ore and seafood were targeted. Raw coal, once a key North Korean export to China, effectively disappeared from the official trade picture.
But the trade relationship has been recovering. One interesting line in the 2026 data is “carburetant”, a coal-adjacent carbon product used in industrial processes. It is now among China’s largest recorded imports from North Korea.
Electricity is another revealing item. Chinese customs records it in kilowatt-hours, and it appears among China’s main imports from North Korea. This is likely linked to the long-standing China-North Korea hydropower system on the Yalu River. The electricity flow is not enormous in Chinese terms, but it is not symbolic either. On the current monthly average, we estimate it at about 446 GWh per year.
The rest of China’s imports from North Korea are a mix of strategic minerals and labour-intensive products: tungsten ores, molybdenum ores, wigs, eyelashes and similar goods.
A curious reader may ask how North Korea pays for its imports from China. The honest answer is that the financing is opaque. What is clear is that North Korea’s visible exports to China are not enough to explain all its purchases.
On an annualised basis, China-North Korea goods trade in 2026 would still be around 40% below the 2017 level. But it is no longer the negligible exchange of 2021.
China has asked Morocco to consider a free-trade agreement. Morocco has not said yes. Rabat is studying the proposal first. Morocco is already a manufacturing platform with trade links to the EU and the U.S. A China-Morocco trade deal could make Chinese firms, inputs and capital even more embedded in Morocco’s export model.
