“Let China sleep, for when she wakes the world will shake.” So, purportedly, said Napoleon some 200 years ago. Today, the EU, Japan and the US are facing the full consequences of this prediction.

Over the past five years, China has become the EU’s second biggest trading partner (after the US), according to the World Trade Organization. And, as asserted by China’s own statistics, the EU is China’s first trading partner (ahead of the US and Japan).

Whereas the EU enjoyed a trade surplus with China at the beginning of the 1980s, the EU-China trade relations are now marked by a sizeable and widening EU deficit with China. Last year the EU’s trade deficit with China reached EUR 131 billion, say EU figures. This year it is expected to grow to EUR 150billion-160 billion, on a par with America's record deficit with China in 2006 (see chart).  This is the EU's biggest bilateral trade deficit.

Despite growing concern about China’s increasing dominance, many experts agree, the EU and China, two of the biggest markets in the world, have everything to gain by deepening their commercial ties. Since 1978, bilateral trade has increased more than 60 fold and reached approximately EUR 254 billion in 2006 (Eurostat).

It is clear that China has much to offer. Cheap labour and extremely efficient, ultra-modern manufacturing methods make the Chinese market very attractive. The EU offers China a mature, capitalist, consumerist economy that is eager to buy cost-effective products. It seems like a perfect match.