In May 2025, EU imports from China remained flat, while exports fell by a further 11%. As a result, its trade deficit widened to €27.4 billion, up 15% from €23.9 billion in May 2024. That amounts to more than $1 billion per day. It is with such numbers that the EU meets China at a summit on July 24, where hopes for a positive outcome remain slim. China’s fixation on trade surpluses and massive reserves sends a crystal clear message: this is less about defending the yuan than about defending the regime, about preserving control without liberalizing.
our forecast was spot on.
Well before 2010, the 17th CPC Congress report urged China to shift its economic model away from reliance on investment and exports toward greater domestic consumption. Fast forward to May 2025, and Qiushi, the Party’s theoretical journal , is still repeating the same message.
Yet the data tells a different story: China’s leadership seems to operate in a parallel world, where facts and claims often contradict each other, but the misleading narrative marches on.
When it comes to China, the surplus is the priority. China’s surplus machine roars: $1.2 trillion annual pace after record June
The Financial Times, on July 17th, highlights the multiple quarters in which China’s nominal GDP growth has lagged behind real GDP growth. This is a serious warning sign of deflationary pressure. But this is not news to us. While the FT points to Q2 2023 as the starting point, we had already raised concerns in Q4 2022 and have flagged the issue repeatedly since then, most recently when China released its 2024 GDP figures.
From January to May, EU imports of all types of electric cars from China fell 5% by value. While hybrid imports surged 157%, pure electric car imports dropped 32%
EU car exports to China are expected to drop to just one-third of their 2022 peak by the end of 2025. Slovakia, with its export hub in Bratislava, has shown greater resilience.
The chances of a reversal in the downward trend are close to zero.
May is typically the last month for shipping wine from the EU to China before summer heat raises sea temperatures for several months. But in May 2025, the volume shipped hit its lowest level in 13 years — nearly 90% below its 2017 peak. The sense that EU winemakers are worn out, frustrated, and disillusioned with the China market now feels inevitable. They are saying goodbye to what was once expected to become a booming market full of true wine lovers. Not anymore.
China has imposed new export controls on technologies used to turn lithium phosphates into battery-ready materials. This includes the preparation of LFP and LMFP cathodes. Also restricted are technologies for extracting lithium from spodumene and converting it into lithium carbonate or lithium hydroxide, as well as brine-based lithium extraction and lithium metal production.
These processes are central to converting raw lithium sources into battery-grade materials, which are essential for electric vehicles and energy storage systems.
In practice, an export license is a government-issued permit that can be withheld at discretion. Under Article 15 of China’s Foreign Trade Law, authorities may restrict or prohibit exports to protect national security or public interest. This gives the government broad flexibility to block or delay technology transfers when it chooses.
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