Spain and China seek new opportunities in their economic relations

The visit to China that the Spanish President of the Government, Pedro Sánchez, will make between tomorrow and Friday highlights the ties between the two countries, which are celebrating their 50th anniversary this year and which present new opportunities from an economic and commercial point of view. 

The Spanish leader's trip comes shortly before he takes over the rotating presidency of the European Union (EU) and, according to the Minister of Foreign Affairs, José Manuel Albares, will serve especially to ask the Chinese leader, Xi Jinping, to "use his personal influence" to get the Russian President, Vladimir Putin, to "put an end to the war in Ukraine". 

However, Sánchez will also devote space during his brief visit to economic matters, as he will give a speech at the Boao Forum - considered the 'Asian Davos' - and will hold a meeting with Spanish businessmen operating in China. 

The Asian giant is Spain's main trading partner outside the EU and the fourth in the total list, behind France, Germany and Italy and ahead of the United States and Portugal. 

According to data from the Spanish Ministry of Industry, Trade and Tourism, in 2022 Spain carried out exports to China worth some 8,014 million euros, while trade in the opposite direction reached 49,653 million euros. 

The evolution of these data in recent years has been particularly favourable for China: since 2019, the year before the pandemic, Spanish exports to the Asian country increased by 17.85%, while those from China to Spain increased by 70.38%, aggravating the situation of chronic deficit that marks the bilateral balance. 

However, the uneven evolution of trade in the years of the pandemic is mainly due to the different moments in which both economies began to recover from the restrictions imposed in the framework of the health crisis, still in force in China until the beginning of this year in the form of the national 'zero COVID' policy, which kept the country practically isolated from the outside world for almost three years. 

"We have come out of the crisis much earlier, and we have started to rely on imports much earlier than they have," Juan José Zaballa, Spain's chief economic and commercial advisor in Shanghai, told EFE. However, he acknowledged that there are still a series of "asymmetries" that mean that the local market is much more protected from Spanish exports than the Spanish market is from Chinese exports. 

Likewise, Zaballa warns of the composition of Spanish exports to China, led by products with little added value such as pork, favoured by the African swine fever epidemic that decimated the Chinese national herd, although he points out that, as one moves up the list, other types of more elaborated goods appear, such as pharmaceutical products or machinery. 

"The reality is that this market is seriously unaware of the potential of Spanish products outside traditional agri-food products and, consequently, we have a lot of work ahead of us to be able to present the true Spanish industrial and competitive image," he affirms. 

Added to this is the fact that Spanish companies generally fall into the SME category and, therefore, find it difficult to undertake the necessary investment in promotion that comes with access to China: "It is an extremely difficult, competitive and regulated market. It is very protected. And it is expensive to enter". 

For this reason, Zaballa believes that the future of economic relations between Spain and China does not lie solely in exports, but is more attractive on the investment side, "perhaps a more interesting strategic option", with opportunities for Spanish companies in sectors such as technological products. 

The Spanish representative also analysed the presence of Chinese companies in Spain and the evolution of the investment profile, marked in the middle of the last decade by an "anarchy" in which "any sector invested in any sector" to a situation of "greater discipline" in recent years. 

"Chinese companies are investing in Spain in sectors that are increasingly linked to their core businesses (...) We will see more and more rigour in the selection of destinations," Zaballa points out. 

In his opinion, the most attractive sectors for Chinese investment are sectors such as automobiles and their components, batteries and, currently, energy -mainly in the renewable energy segment-, with opportunities for diversification in industries such as chemicals, plastics and special materials. 

Beyond the industry itself, Zaballa stresses that Spain enjoys a "great comparative advantage" due to its geographical location, and compares it to the case of Mexico: "Being located next to markets with 350 million inhabitants with great purchasing power". 

"If you add to this a great infrastructure, a service economy, great competitiveness, openness, an unbeatable business climate and a situation of practically insignificant political risk, under these conditions, Spain is going to be one of the fundamental destinations for Chinese investment in Europe, a productive investment to satisfy the European market," the minister predicts.