China' s rapid economic development in the past twenty years has had a significant impact upon EU-China trade and economic relations. Total two-way trade has increased more than forty-fold since reforms began in China in 1978, and was worth €135 billion in 2003. The EU has gone from a trade surplus at the beginning of the 1980s to a deficit of €55 billion in 2003, its largest trade deficit with any partner. Overall, China is now the EU’s second largest non-European trading partner after the US, and the EU is China's second largest export market. In recent years, EU companies have invested considerably in China (new annual flows of utilised FDI of around USD 4.2 on average in the last 5 years), bringing stocks of EU FDI to over USD 35 billion.

The EU trade deficit reflects among other things the effect of market access obstacles in China. EU policy in this area aims at the liberalisation of trade and investment flows. Key objectives include the removal of barriers to imports of specific goods (price controls, discriminatory registration requirements, arbitrary sanitary standards); the removal of obstacles to investment (geographical restrictions, joint venture requirements, discriminatory licensing procedures, outright closure of certain sectors to foreigners, restrictive foreign exchange regulations); and the improvement of the business environment (protection of intellectual property rights etc.).

The EU welcomed China's accession to the World Trade Organisation in late 2001, which came after 15 years of tough negotiations. China's accession was a historic leap for the WTO, enlarging its reach by 1.3 billion people in one step and making it a truly global organisation. Membership will bring benefits both to China and to its trading partners, cementing China’s place in the global economy and ensuring a greater degree of certainty for traders in China and around the world. For these benefits to be realised fully, it is essential that China implements its terms of accession in a timely and comprehensive manner; the monitoring of China’s WTO compliance will thus be a major EU priority in the years to come. At the same time, the EU wishes to support China in this arduous task, both through the development of sectoral dialogues in key economic areas and through the EU-China Co-operation Programme (see below). The EU has already put in place several projects aimed at helping China to meet its WTO obligations.