EU-27 exports are holding up and are being re-routed at speed. Year to date, Jan–Aug 2025 is up 2.5% on 2024 with China and Russia included. Strip those two out and growth improves to 3.9%, which points to genuine demand elsewhere.
The destination mix has shifted in a short window. China’s share of extra-EU exports moved from 11% in Jan–Aug 2021 to 8.5% in 2024 and 7.5% in Jan–Aug 2025. Russia’s share fell from 4% pre-invasion to 1.2% in 2024 and 1.1% in Jan–Aug 2025. Exposure to the two choke factors has been reduced.
Growth holds while exposure to Russia and China falls
On a 2021 base, the cumulative picture is constructive. Exports are up 25% by Jan–Aug 2025 when China and Russia are kept in the basket, and 34% when they are excluded. That gap is the rebalancing story in one number.
Sales lost or constrained in China and Russia have been offset by gains in other markets.
This is not a boom. A 2.5% nominal increase is steady rather than strong. But the system is doing what it needs to do: diversify, absorb shocks, and keep moving forward.
“EU Exports Stay Resilient Amid Rapid Rebalancing” captures the moment.
Meanwhile, Global Times tells the EU how it ought deal with China; the piece betrays anxiety about losing the EU as an export destination.
EU imports from China exceeded 7 million t in August for the first time. The deluge continues. On a per-capita basis, that’s about half a kilogram of goods made in China for every EU citizen each day.
January–July 2025, EU imports from China tell a clear story. Pure electric cars (BEVs) fell by €1.34 bn while hybrids (plug-in and non-plug-in) rose by €1.36 bn. That is a near one-for-one value swap. It looks like rerouting around policy rather than hearts and minds changing overnight.
Our working hypothesis is simple: the 2024 EU countervailing duties on BEVs from China bent the flow. Hybrids sit outside the BEV duty scope, so exporters shifted the mix to keep presence in showrooms.
We tested this using monthly EUROSTAT flows by CN code. We treated China-BEV as the policy-exposed group and non-China-BEV as the control, then added hybrids as a placebo and for a triple-difference check. The estimates point to policy-driven substitution: tariffs matter.
One caution on interpretation. This is a swap in euros, not cars. China Customs data indicate the average FOB unit price for BEVs and hybrids is similar, so the near euro-for-euro change likely maps to a comparable number of vehicles shifting from BEVs to hybrids. Still, EU import values are measured at the border and include freight/insurance; differences in weight and model mix mean we shouldn’t read this as a perfect one-for-one swap.
Even with that caveat, the conclusion stands.
Tariffs beat consumer preferences.
China’s surplus is by design, with SOEs controlling imports. The surplus now stands at 19% of China’s total trade. For a large economy, a double-digit surplus on this metric is exceptional; in everyday terms, stunning. It will raise eyebrows at the IMF. It’s about time.
Used cooking oil (UCO) is inedible or chemically treated animal and vegetable oil used mainly as industrial feedstock, notably for biofuels. The trade diversion is evident.
Imports drop 16% from its peak in 2021
China’s 14th Five-Year Plan, which ends in December 2025, said money supply (M2) and total social financing should “basically match” the economy’s nominal growth. That alignment did not hold in most years. From 2021 to 2024, M2 grew about two percentage points faster than nominal GDP on average. Full-year 2025 is not in yet, but with M2 still running high single digits and nominal growth subdued, the gap likely persists. That is not “in line” in the literal sense.
You cannot earmark M2, but when money grows faster than activity and private loan demand is weak, Chinese banks tend to steer liquidity into safer channels: buying local-government and policy bank bonds to refinance debt, extending and restructuring existing loans rather than making new ones, and targeted housing stabilisation to finish presold homes and absorb inventory.
Why keep money growing if it is not lifting activity? To prevent a worse outcome. Policymakers keep cash in the pipes so refinancing continues, and a disorderly deleveraging is avoided. That lowers the risk of cascading defaults, job losses, and a sharper fall in output. It seems China buys time for balance-sheet repair.
In China’s five-year plans, when targets drift, the narrative shifts. We’ll soon see what the next five-year plan has in store for M2.
On SAFE’s travel-services debits (BOP), outbound tourism disappointed: August 2025 trailed August 2024, and January–August rose just 1.4% y/y. Travelers may have deferred trips to the long October holiday that overlapped with Mid-Autumn; October data will test that.
As for visitors to China: using SAFE’s travel-services credits (BOP) as our gauge, inbound visitor spending is near an all-time high; January–August rose 56% y/y.
The chart shows a five-year slide from disinflation into mild deflation: ~2.9% in 2019, ~0% through 2023–24, and −0.1% year-to-date in 2025. Reopening never produced a price pop; prices hovered around zero for two years before turning slightly negative.
Cumulative headline inflation since 2019 is about 9% (~1½% a year), consistent with weak domestic demand, producer-price deflation passing through to consumer goods, and fierce price competition from excess capacity across sectors.
With CPI near zero and real GDP ~4–5%, the growth mix leans on net exports, while housing drags and consumption underperforms.
This is surplus-led growth.
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