BEIJING, China: China and the European Union have reached an agreement that could cut Chinese exports of hybrid and plug-in hybrid cars to the bloc by more than half, marking a significant step in efforts to address the EU's widening trade deficit with Beijing.

The "shared understanding" would "moderate" China's exports of hybrids and plug-in hybrids to the EU and cut imports by several million cars over four years, European Trade Commissioner Maros Sefcovic said on October 9, without detailing how the agreement would be implemented.

The understanding followed two days of discussions between Sefcovic and Chinese officials, including Commerce Minister Wang Wentao, after years of disputes over China's growing goods shipments, particularly cars.

"I came here with one clear purpose: to start rebalancing the EU-China trade relationship and to make sure this first phase of negotiations under the trade and investment consultations delivers its first tangible outcomes," Sefcovic told a press briefing.

The EU's trade deficit with China cost the bloc more than one billion euros (US$1.12 billion) a day last year, according to EU data.

Wang told Sefcovic that China was not the root cause of the EU's problems but a partner in solving them, according to China's commerce ministry.

The two sides also reached understandings to improve EU products' access to Chinese markets and facilitate China's export licensing for rare earths and permanent magnets, Sefcovic said.

EU officials have been concerned by a sharp rise in Chinese car imports. Plug-in hybrid imports into the EU rose 86 percent in the year to September, while prices fell 20 percent. More than half of these vehicles now come from China, compared with China's 30 percent share of plug-in hybrid electric vehicle imports by value in 2025.

China and the EU also agreed to continue discussions on price undertakings and review procedures related to the EU's anti-subsidy investigation into Chinese electric vehicles.

Their dispute over cheap Chinese EV exports dates back to 2024 and has since expanded to brandy, pork and dairy as well as rare earths and critical minerals.

As part of the consensus, China's commerce ministry said it would continue facilitating export licenses for rare earths and permanent magnets through a "green channel" mechanism.

Chinese shipments to the EU totaled $560 billion last year, up from $517 billion in 2024, according to UN Comtrade data. China imported $268.3 billion of European goods, down from $269.4 billion a year earlier.

The two sides will continue exploring possible tariff reductions on certain goods within WTO rules and discussions on market access for medical devices. Their next regular consultation meeting is scheduled for March 2027.