Taking the Pulse –Autumn 2023 Newsletter
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In Focus: Competition or collaboration? How do Chinese stakeholders view the climate-trade nexus?
The intertwining of climate and trade issues is on the rise, notably reflected in the increasing requirements and restrictions on high-carbon products within trade policies. Facing an aggravating climate and environmental crisis with no time left to limit global warming, some governments view the adoption of these trade measures as a potentially helpful approach to achieve specific climate goals and boost low-carbon transition. A prime example is the Carbon Border Adjustment Mechanism (CBAM) – the EU’s new regulation designed to prevent carbon leakage. In practice, it imposes a carbon pricing differential on specific high-carbon imports, utilizing a sophisticated calculation methodology.
But CBAM has sparked controversy. As a leading global exporter, China does not endorse the rationale behind this mechanism. The Ministry of Commerce recently underscored the imperative of preventing the emergence of potential new trade barriers. In the hope of better addressing climate change together, it advocates for the facilitation and liberalization of trade investment in green sectors.
For Chinese enterprises, CBAM reflects the preference of developed international markets for low-carbon products. However, the flip side is that such policies also bring about greater costs and technical challenges associated with carbon data collection and calculation.
And the climate-trade nexus has another dimension. With a growing emphasis on their local low-carbon industries, regions like Europe and the United States are applying stricter standards for importing low-carbon products.
Emerging sectors in China, including electric vehicles, power batteries, photovoltaics, wind turbine components and other clean industries, face mounting challenges in export and foreign investment. These challenges stem from diverse demands, from requirements for products and supply chains to meet high environmental sustainability standards, to restrictions ostensibly in the name of ensuring supply chain security and anti-subsidy investigations.
In October, the EU launched an anti-subsidy investigation on Chinese electric vehicles, citing concerns that subsidies from the Chinese government are suppressing prices. The lower prices, in turn, contribute to the growing market share of Chinese automakers in Europe, thereby distorting the European market. On similar grounds, there are reports suggesting that the EU is also considering an anti-subsidy investigation on wind turbines manufactured in China.
Trade policies related to climate or clean industries have become a prominent focus among all climate related issues in the Chinese media this year, with discussions predominantly centered around effects on competitiveness. These discussions reveal concerns about the new trade barriers and unfair competition and show that expectations for global climate cooperation among the Chinese public dampened significantly. Therefore, fostering mutual understanding and dialogue between China and other nations on these emerging issues is becoming crucial.
To shed light on different reactions and new thinking at the climate-trade nexus, Taking the Pulse has carefully selected representative viewpoints—sourced from businesses, research institutions, and government entities—in recent Chinese media. The objective is to present a comprehensive picture: some voices express concern, some delve into the impacts on Chinese enterprises and products, and others propose constructive strategies in the hope that Chinese businesses will turn pressure into motivation and exert greater leadership in low-carbon industries.
Quotes and opinions
Turn pressure into progress
Thank you for reading!
Authors: Zhe Yao, Siyin Li and Diego Montero
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