Can the EU and China Reach Agreement? Zones of Compatibility and Incompatibility

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........

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