Signal Why Chinese exports to Europe are rising: weak demand at home, limited trade diversion and coinciding import gains and output losses

Summary

The report separates three channels through which Chinese supply growth reaches Europe. On the first, Al-Haschimi and colleagues (2025) find that the property slump and weak consumption left Chinese output unabsorbed at home while manufacturing investment continued, and that the rise in exports to Europe began before the latest US tariff increases, making weak domestic demand the more important explanation. On the second, trade diversion, Le Roux and Spital (2026), using data for January to September 2025, find no statistically significant diversion of Chinese goods to the euro area because of US tariffs, only limited effects in regions such as ASEAN and Africa. On the third, Boullenois and Kratz (2025) find that EU manufacturing output fell 3.5 percent between 2022 and 2024 and that rising Chinese imports coincided with falling European production in 59 of 114 four-digit NACE industries. They stress that Chinese imports were not the only cause, as energy prices, slow growth, weak demand and trade fragmentation also played a part.