What is next for EU–China trade and investment cooperation? In this essay, I will explain what the zones of compatibility and incompatibility are from each side’s perspective, and the most probable scenarios. The Venn diagram below summarizes it.
The European Union and China face a paradox: significant economic interdependence alongside growing divergence in their political and economic models. The new Trade and Investment Cooperation (TIC) consultations aim to do more than address trade imbalances. They test whether two distinct systems can manage interdependence without escalating economic relations into geopolitical confrontation. According to Eurostat, in 2025, EU–China trade totalled €759 billion, with the EU’s goods deficit at €359.8 billion.
Despite differences, the negotiations reveal a genuine zone of compatibility. Both parties seek to maintain trade, investment, supply chain stability, and predictable market conditions. China can offer increased imports, selective market access, and regulatory predictability. Europe seeks reciprocal access, greater transparency, and reduced distortions from subsidies and industrial overcapacity. The EU acknowledges that cooperation is possible but insists the relationship must become more balanced.
There is room for a pragmatic agreement, despite the industrial and technological imbalance between China and the EU. China could expand access for European companies in specific sectors, improve transparency, and increase purchases of European goods and services. Europe, in turn, could accept that China’s state-guided industrial model will remain a condition of economic cooperation. The goal would be managed reciprocity, not systemic convergence.
However, the zone of incompatibility is significant. Brussels seeks a level playing field, restrictions on distortive subsidies, protection against forced technology transfer, and greater reciprocity. These demands challenge core aspects of China’s development model, where state guidance, industrial policy, and strategic sectors are central. The EU’s earlier Comprehensive Agreement on Investment (CAI), concluded in principle in 2020, illustrates both potential and limits: China made significant market-opening commitments, but the agreement stalled due to political and geopolitical tensions – some see the hand of the U.S.
Three scenarios are consequently possible.
Scenario one: limited agreement. This is the most likely outcome. Brussels and Beijing could reach sector-specific agreements on market access, agricultural products, investment, industrial overcapacity, customs procedures, and supply chains. While this would not transform the relationship, it could enhance predictability.
Scenario two: strategic accommodation. A more ambitious agreement could establish reciprocal investment guarantees, mechanisms to monitor subsidies and industrial capacity, expanded European access to Chinese markets, and Chinese investment under European regulations. This would be a significant step toward managing strategic interdependence rather than reducing it.
Scenario three: managed confrontation. If disputes over subsidies, technology, market access, security, and industrial competition remain unresolved, the EU could expand defensive measures and de-risking strategies. China could respond with its own restrictions. Interdependence would persist but become increasingly politicized.
Who wins and who loses? European consumers and internationally competitive European companies could benefit from greater access to the Chinese market and cheaper, more diversified supply chains. Chinese exporters and investors would benefit from greater certainty in the European market. European industries unable to compete with Chinese scale and cost advantages could, however, face intensified pressure. China, meanwhile, would gain from continued access to Europe’s affluent market and advanced technologies, but could resist concessions that weaken strategic control over its industrial model.
The decisive question is therefore political: can Europe understand China without demanding that China become more European? The EU’s conception of reciprocity is legitimate, but if it becomes a demand for systemic transformation, negotiations will reach a wall. China is not simply another European-style market economy; its political economy reflects a different historical and developmental trajectory of a civilizational state.
This raises the question of European strategic autonomy. Europe cannot credibly negotiate with China if every major economic decision is filtered through the prism of the China–US rivalry. The EU–US relationship remains indispensable, but Washington’s strategic priorities are not necessarily identical to Europe’s commercial interests. ASML is a classic example, where the major Dutch European tech company was sacrificed on U.S. geopolitical demands, or when, after the “Chinese balloon” incident in the U.S., Chinese researchers were requested by Washington not to be allowed in Dutch sensitive areas, such as maritime or airspace. More recently, Washington’s demands were directed at Nexperia, a Chinese semiconductor manufacturer in the Netherlands.
The current geopolitical environment makes this tension increasingly visible, as Europe reaffirms its dependence on Washington while seeking greater strategic autonomy. Washington’s interests and vision for Europe are not the same as Europe’s own interests and strategic autonomy. Curiously, it is very hard for Europeans to understand this simple assertion.
The real test of the TIC is therefore not whether Europe can force China to accept the European model, which China will not, and Europeans should not insist on this. Nor is it whether China can preserve the status quo unchanged. The test is whether both can distinguish legitimate economic reciprocity from geopolitical containment.
The most promising outcome would be a pragmatic middle ground: neither decoupling – which would be disastrous for Europe in times of interdependent supply chains – nor unconditional engagement, but governed interdependence.
At the ideal level, which Europe should pursue, the EU does not need to choose between Washington and Beijing or seek Washington’s blessing when its strategic interests are at stake. It needs sufficient autonomy to negotiate with both according to its own interests. The future of the TIC may ultimately demonstrate whether Europe is capable of moving beyond a purely North Atlantic-guided view and acting as an autonomous economic power in an increasingly multipolar world.
Ricardo Martins – Doctor of Sociology, specialist in European and international politics as well as geopolitics
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