How the EU Green Deal Will Impact China’s Business

14 April 2025 / Report

The European Green Deal (EGD) aims to cut European Union emissions by 55% by 2030 compared to 1990 levels, and achieve climate neutrality by 2050, with broad impacts on global trade and value chains. China, as a key EU trading partner, will face impacts such as limited market access, higher export costs, stricter green requirements, and increased sustainability reporting obligations. Chinese businesses engaged in the EU value chains need to adapt to these evolving regulations to manage risks and seize opportunities.

Key Insights

China’s green technology sectors (e.g. renewables, batteries, and electric vehicles), will encounter limited EU market access due to the EU’s “de-risking” strategy on China. The Green Deal Industrial Plan sets numeric targets of boosting local production and reducing dependency on imports of China’s green technologies. As a result, market access of China’s clean tech imports to the EU will be limited, with increased trading scrutiny, tariffs, or other barriers. Affected companies in these sectors should conduct scenario analysis and reconfigure supply chains accordingly.
Energy-intensive and high-carbon sectors in China will incur higher export costs to the EU. The EU’s Carbon Border Adjustment Mechanism (CBAM) imposes a carbon tax on high-emission imports. Although the short-term economic impact on China’s exports is limited, the targeted sectors such as steel and aluminum could see notable cost increase, and long-term costs may rise for other companies as the CBAM expands its coverage to other sectors. Companies in these sectors in China could mitigate negative impacts by supplying low-carbon products to the EU market.
China’s companies will have to adhere to stricter green requirements when manufacturing or placing products in the EU market. The EGD aims to make sustainable products the norm, with regulations like the Ecodesign for Sustainable Products Regulation (ESPR) introducing more product-specific green requirements on carbon footprint management and circularity across the product lifecycle.
China’s companies will be subject to elevated sustainability reporting obligations when engaging with EU businesses. The EU mandates large companies to disclose Environmental, Social and Governance (ESG) information, monitor supply-chain violations, and track product lifecycles and carbon footprints via the Digital Product Passport (DPP). While foreign MNCs (multinational corporations) in China tend to have more sophisticated reporting systems than domestic firms, they should further enhance their business capacity for delivering reliable, consistent, high-quality, and digitally smart ESG data cost-effectively to maintain a competitive edge.