Mounting Tensions Could Spark EU-China Trade War, European Chamber President Warns

China and Europe face a "slow motion train accident" as a rising tide of protectionism threatens to become a full trade war, the head of a European business lobby group warned on Wednesday, a day after Germany's chancellor conveyed European concerns to Beijing.

Jens Eskelund, president of the European Chamber in China, said that while some worries about trade in both countries were legitimate, there was a risk of unproductive decoupling if European and Chinese leaders did not increase dialogue.

"A train accident has not happened yet but we can see it will happen if we continue in the same direction of travel as we are today," Eskelund said in Guangzhou, at a meeting of the chamber's South China chapter.

"We need our leaders to sit down and explore the ways that we can avoid that this becomes a full-blown trade war. And I think it's getting a little bit urgent."

On Tuesday Germany's Chancellor Olaf Scholz finished a three-day tour of China with talks with Chinese President Xi Jinping in which Scholz relayed European concerns about Beijing's investment policies and pushed for improved market access.

The European Union has launched several investigations into whether Chinese manufacturers were dumping subsidised goods such as electric vehicles on its markets.

U.S. Treasury Secretary Janet Yellen also visited China earlier this month, and said on Tuesday that China's massive investments in advanced manufacturing of clean energy goods had resulted in an unfair playing field.

Eskelund said the recent high-level meetings were encouraging.

As Eskelund spoke, thousands of foreign buyers were scouting Chinese manufacturers for deals at the biannual Canton Fair, the country's largest trade show, on the banks of the city's Pearl River.

Eskelund said it was impossible to think of global supply chains without China, given its status as the world's leading manufacturer.

"What we hope to see change a little bit is that there is an understanding that China has such a vast scale in manufacturing, that just small incremental increases in manufacturing can have huge global implications."

(Reuters - Reporting by David Kirton; Editing by Alex Richardson)