Other BriefingsChina-Netherlands Relations: Bilateral Trade and Investments Overview
Dutch Prime Minister Mark Rutte visited China on March 27, 2024, along with the Ministry for Foreign Trade and Development Cooperation Geoffrey van Leeuwen. During their interactions with President Xi Jinping and the Chinese Minister of Commerce Wang Wentao, the Dutch side discussed areas for expanding bilateral cooperation and business activities, while also addressing relevant international and regional issues. This article offers an overview of the state of China-Netherlands trade and investment relations, while also considering possible future developments in the bilateral ties between the two countries.
On Mach 27, Dutch Prime Minister Mark Rutte, along with the Minister for Foreign Trade and Development Cooperation Geoffrey van Leeuwen, embarked on an official visit to China. During their visit, the two Dutch representatives engaged in high-level meetings with Chinese President Xi Jinping and the Chinese Minister of Commerce Wang Wentao.
This was Mark Rutte’s first diplomatic visit since 2005, against the backdrop of heightened international tensions.
During the meetings, both parties engaged in open dialogues regarding significant international and regional issues, such as the current decoupling discourse that has characterized the West’s recent strategy toward China. Furthermore, both sides recognized and committed to the possibility of expanding bilateral cooperation and business operations.
Leading up to this key meeting, the present article reviews the recent trajectory of Netherlands-China trade, investments, and diplomatic relations, while also considering potential future developments.
A glimpse into China-Netherlands relations
The official inception of China-Netherlands relations commenced in November 1954, initially at the Charge d’affaires level, later elevated to ambassadorial status in 1972.
Despite minor setbacks, over the years, both countries fostered robust cooperation across political, business, cultural, and people-to-people exchanges, marked by frequent high-level exchanges that deepened political mutual trust.
In 2014, following President Xi Jinping’s first official state visit to the Hague during the 2014 Nuclear Security Summit, China and the Netherlands agreed to forge an open and pragmatic partnership for comprehensive cooperation, underscored by a shared commitment to promoting cooperation and pursuing common development goals.
In 2019, a noteworthy shift in the relationship occurred with the publication of “The Netherlands-China: A New Balance” document. This marked a change in Dutch policy towards China, transitioning from an open-armed approach to one emphasizing cautious engagement, particularly in critical economic sectors. The document reflected a strategic recalibration aimed at safeguarding Dutch interests: while the government still strives for reciprocity in bilateral relations, it adopted a more active approach in shielding companies with advanced technologies from Chinese investors.
This adjustment in Dutch policy is closely linked to evolving geopolitical dynamics that can affect China-Dutch relations. As a member state, the Netherlands’ approach to China is inevitably influenced by the broader European Union (EU) strategy, which increasingly advocates for de-risking from China. The Netherlands bears a responsibility to ensure consistency with the EU policies, thereby amplifying the impact of the EU’s stance on its approach.
Furthermore, like other European states, the Hague finds itself entangled in the ongoing trade and technology “war” between the US and China. The political and economic pressure to align with the US’s China strategy further complicates the bilateral dynamics between the two nations. A notable example occurred in June 2023 when the Netherlands chose to restrict the export of advanced microchip production machines to China, resulting in strains in their bilateral relations.
Trade relations between the Netherlands and China
The Netherlands and China serve as vital commercial partners for one another. In 2021, bilateral trade between these two nations surged to unprecedented levels, reaching an all-time high of US$116.45 billion, marking the fifth consecutive year of record-breaking trade volumes.
However, it is worth noting the existing trade imbalance that characterizes China-Netherlands relations, with the Netherlands importing substantially more from China than it exports. Since 2015, the value of goods imported from China has more than doubled, from EUR 29 billion (around US$31 billion) to EUR 64 billion (around US$69 billion) in 2022, while exports remained significantly lower. In 2022, exports stood at EUR 14.6 billion (around US$15 billion).
This disparity persisted throughout 2023, with the Netherlands registering the largest trade deficit among the European countries, amounting to EUR 95 billion (around US$102 billion), as per Eurostat data.
In 2023, the Netherlands emerged as the EU’s largest importer from China, surpassing Germany, with total imports reaching EUR 117 billion (around US$126 billion). In terms of exports, instead, the country ranked third within the EU as the largest exporter to China. By the end of 2023, Dutch exports amounted to EUR 22 billion (around US$23 billion).
China’s leading exports to the Netherlands consisted of telephones (US$1.09 billion), semiconductors devices (US$1.05 billion), computers (US$902 million), electrical transformers (US$481 million), and electric batteries (US$431 million).
| Top 5 Products Exported from China to the Netherlands in 2023 | |
| Product category | Amount (US$) |
| Telephones | 1.09 billion |
| Semiconductors devices | 1.05 billion |
| Computer | 902 million |
| Electrical transformers | 481 million |
| Electric batteries | 431 million |
Source: OECD
Leading imports from the Netherlands were malt extract (US$196 million), machines and apparatus of a kind (US$120 million), polyacetals (US$71.5 million), pig meat (US$54.1 million), and packaged medicaments (US$40.4 million).
| Top 5 Products Imported by China from the Netherlands in 2023 | |
| Product category | Amount (US$) |
| Malt extract | 196 million |
| Machines and apparatus of a kind | 120 million |
| Polyacetals | 71.5 million |
| Pig meat | 54.1 million |
| Package Medicaments | 40.4 million |
Source: OECD
When reading this data, it is important to keep in mind that Dutch trade statistics are often over-estimated due to what is commonly referred to as the “Rotterdam effect.” The Rotterdam port serves as a key trading hub in Europe, resulting in goods destined for EU countries passing through Dutch ports and being recorded as extra-EU imports by the Netherlands. This partly leads to an inflation of Dutch trade flows.
Evolving bilateral investment landscape
Bilateral investments have been a key pillar of the relationship between China and the Netherlands.
Dutch investments in China
Dutch investments in China have experienced rapid growth in recent years.
Well-known Dutch companies, such as Royal Dutch Shell, ING Group, Unilever, and Vlisco, have invested in China, through the establishment of production companies, research institutions, or representative offices.
Statistics from the Chinese Ministry of Commerce reveal that by the end of 2020, the Netherlands had set up 3,807 enterprises in China, with a cumulative actual investment of US$23.84 billion.
By the end of 2021, the Netherlands’ investment stock in China had surged to US$24.95 billion, firmly establishing itself as the second-largest source of foreign investment in China within the EU nations.
Dutch businesses’ advantages align with China’s investment priorities
China’s development agenda has been increasing its focus on rural revitalization, green transition, and healthcare. These have been identified as heightened priority sectors targeting foreign investment to spur growth and innovation. And, Dutch businesses maintain a competitive edge to cater to this trend.
According to the most recent Catalogue of Encouraged Industries for Foreign Investment, effective from January 1, 2023, China put great emphasis on certain sectors as indicated in the table below.
| China’s Priority Investment Domains as per the 2022 FI Encouraged Catalogue | |
| Industry | Encouraged sectors newly added or refined (not exclusive) |
| Healthcare | > Production and research and development of therapeutical medical and health textiles, artificial skin, absorbable suture, hernia repair materials, new dialysis membrane materials, catheters for interventional therapy, and high-end functional biomedical dressings.
> The development and production of drugs for rare diseases, special drugs for children, and consumables related to pharmaceutical manufacturing. > Consumables related to the pharmaceutical manufacturing industry: separation and purification media, solid phase synthesis media, chiral resolution media, consumables for drug impurities control and detection, etc. |
| Rural revitalization | > Efficient water-saving irrigation, farmland soil improvement and ecological management, comprehensive utilization of farmland reserve resources – such as saline-alkali land, and green farmland construction, technology development, and application.
> Smart agriculture: integrated application of software technology and equipment, digital transformation of agricultural production, operation, and management. > Rural environmental remediation, sewage and garbage treatment, cold chain logistics for agricultural product storage, rural e-commerce, and tourism |
| Green transition | > Green hydrogen fuel preparation technology
> Clean production technology development and service, traditional energy clean operation, engineering construction and technical service, and clean production evaluation, certification, and audit. > Advanced system integration technologies and services of low carbon, environmental protection, green, energy saving, and water saving. > Development and application of environmentally friendly technologies. |
On the other hand, the Netherlands is renowned for its innovation prowess and advanced capabilities across various sectors, including AgriTech, High-Tech, and sustainable solutions:
- Life science and health sector: The Netherlands is at the forefront of clinical, medical, and pharmaceutical research and innovation, making it an appealing destination for pharmaceutical production and export. Furthermore, the country facilitates approximately 600 new clinical drug trials annually. These exceptional attributes within the life sciences and health sector are further enhanced by the collaborative ecosystem fostered through the Quadruple Helix approach, facilitating seamless collaboration between industry, academia, government, and society.
- Agriculture and AgriTech: The agricultural sector has always been vital in the Dutch economy. In recent years the Netherlands has pushed a notable transition of this sector towards sustainable and high-tech agriculture, emerging as a global leader in AgriTech innovation. Particularly renowned is its expertise in greenhouse horticulture and precision farming. Furthermore, the country has pioneered cell-cultured meat, vertical farming, seed technology, and robotics for milking and harvesting. These innovations have not only enhanced production efficiency, making the Netherlands the largest exporter of agricultural and food technology, but also contributed to reductions in water consumption, carbon emissions, and methane emissions.
- Renewable energy: In terms of renewable energy, the Netherlands stands as a pioneer in green hydrogen, battery, and smart-grid energy technology. In 2023, the Netherlands achieved a significant milestone in renewable energy generation, with 48 percent of electricity sourced from renewables like solar, wind, and water. Notably, the country’s expertise in offshore wind turbine installation has led to the establishment of 4.7 GW of offshore wind capacity, meeting approximately 16 percent of the current electricity demand of the country.
- High-tech system: Finally, the Netherlands’ prowess in high-tech systems and materials, particularly in fields such as robotics, semiconductor technology, and aerospace, offers promising avenues for collaboration and investment. Particularly, in the semiconductor technology sector, the country has achieved noteworthy results with Dutch semiconductor equipment being used in 85 percent of all chips worldwide during their design, development, and manufacturing phases.
Concurrently, by leveraging their knowledge and strengths, Dutch innovators can capitalize on various opportunities for collaboration and investment that align with China’s priorities, creating mutually advantageous partnerships. This alignment not only offers the potential to deepen China-Netherlands cooperation, but it would also foster mutual sustainable growth advancing the shared sustainable development goals of both countries.
Chinese investments in the Netherlands
The flow of Chinese investment into the Netherlands has seen significant fluctuation in recent years, reflecting evolving economic priorities and shifting regulatory landscapes in both countries.
In 2019, Chinese foreign direct investments (FDI) in the Netherlands reached approximately US$3.89 billion, tripling from the previous year and elevating the country to China’s primary investment destination in the EU, as reported by the Chinese Ministry of Commerce. However, by 2021, the landscape had shifted, with the Chinese investments in the Netherlands plummeting to US$1.704 billion – a stark decline of 65.5 percent from the previous year. Despite this drop, the Netherlands retained its status as the top investment hub of China among EU countries, with China’s total investment in the country reaching an impressive US$28.49 billion by the end of 2021.
This decline could largely be attributed to the Dutch government’s 2019 shift in strategic approach, which effectively placed constraints on the influx of Chinese capital into the country. As a result, the government bolstered its support for local firms by injecting funds into “endangered” sectors, as demonstrated by its intervention to rescue the shipbuilding company Royal IHC from bankruptcy in April 2020, thwarting an alleged Chinese takeover attempt.
The efficacy of Dutch measures in safeguarding its strategic assets and fostering a balanced investment environment became evident in the 2022 data from the Chinese Ministry of Commerce. This revealed that most acquisitions of key Dutch companies by Chinese entities occurred before 2020.
Despite these fluctuations, Chinese enterprises have continued to gradually diversify investments across various sectors in the Netherlands, expanding to key areas such as:
- transportation and logistics;
- electronics;
- high-tech systems and materials; and
- life sciences.,
By 2022 Chinese companies had established over 720 direct investment enterprises in the Netherlands.
Rotterdam Port as a strategic investment hub
Among key investments, it is worth mentioning China’s significant interest in Dutch transportation infrastructure, particularly in the Rotterdam Port. Despite the absence of an official China-Netherlands Memorandum of Understanding for Belt and Road Initiatives (BRI) cooperation, China has directed substantial financial resources towards enhancing the port’s capability. This underscores its commitment to fostering economic cooperation while bolstering key trade routes. As one of Europe’s busiest and strategically vital ports, Rotterdam Port serves as a crucial junction for merchandise transfer along the BRI route.
Specifically, Chinese state-owned companies such as COSCO and China Merchants, alongside the Hong Kong-based private firm Hutchison, have invested their assets in Rotterdam’s container terminals, enhancing their infrastructure, and improving connectivity between China and Europe.
Notable among these investments is COSCO Shipping Corporation’s acquisition of a 35 percent equity stake in the Euromax Container Terminal in 2016, which consolidated its position within the port, gaining a foothold in Europe’s transshipment network.
By 2023, Chinese investments in the Rotterdam port involving acquisition ownership stakes in container transshipment companies accounted for about 8.2 percent of the port’s total container transship capacity.
China-Netherlands trade and investment agreements
To strengthen their economic and trade ties, China and the Netherlands have signed several significant agreements over the years. One of the most significant treaties is the Bilateral Investment Protection Agreement (BIT).
This treaty, originally signed in 1985 and then updated in 2001, aims to promote the intensification of economic relations between the two countries by fostering a stable and favorable environment for investments, thus encouraging mutual economic growth.
Additionally, in 1987, the Netherlands and China signed the Avoidance of Double Taxation Agreement. This agreement, renewed in 2013, plays a crucial role in reducing the tax burden for businesses operating and investing in both countries. The main taxes covered included corporate tax, wage tax, income tax, and dividend tax.
Dividends: The double tax treaty between China and the Netherlands reduces the dividend withholding tax rate to 5 percent if the beneficial owner holds at least 25 percent of the share capital of the company paying the dividends for at least a year. For holdings below 25 percent, the withholding tax rate is 10 percent. Government-owned entities of either country are exempt from dividend withholding tax.
Interest: An interest withholding tax of up to 10 percent is applied on payments from China to Netherlands residents. However, since the Netherlands does not levy an interest withholding tax, Chinese residents receive the full interest amount. Certain exemptions apply for interest payments guaranteed or insured by government entities.
Royalties: A maximum withholding tax rate of 10 percent is imposed on royalty payments from China to Netherlands residents. However, the Netherlands does not impose a withholding tax on royalties. A reduced rate of 6 percent applies to royalties for the use of industrial, commercial, or scientific equipment paid from China. This facilitates direct investment from the Netherlands into China.
Capital gains: China historically retained taxing rights over assets within its territory, including capital gains from shares in Chinese companies. The DTAA stipulates that capital gains on shares in Chinese companies are taxable in China only if certain conditions are met, such as deriving more than 50 percent of their value from immovable property in China or if the seller held a 25 percent participation in the company for at least a year. Certain exemptions apply for shares listed on recognized stock exchanges or held by government entities.
The Netherlands have also concluded a separate tax treaty with Hong Kong, which entered into force January 1, 2012.
China and the Netherlands have collaborated on the development of trade initiatives under platforms like the Joint Economic and Trade Committee. However, at present, no free trade agreement has been ratified by the two countries, with neither negotiations nor consideration of such underway.
Outlook for China-Netherlands relations
The recent meeting between the Dutch PM Mark Rutte and Chinese President Xi Jinping came amid tensions sparked by the Netherlands’ recent imposition of export control restrictions on advanced microchips production machines to China, monopolized by Dutch multinational ASML. This move has been perceived as succumbing to pressure from Washington.
In response, China has urged the Netherlands to rethink its export ban while also fostering a fair and transparent business environment for Chinese companies to facilitate deeper trade cooperation between the two countries. This situation put the Hague in a difficult position, torn between aligning with the US’s strategic approach towards China and the allure of expanding economic opportunities in the lucrative Chinese market.
Despite these challenges, as per what emerged from the recent meeting, the future of Netherlands-China relations seems to hold the potential for enhanced cooperation across various sectors. Their partnership remains vital for the promotion of mutual growth and technological innovation. However, careful consideration of further economic strategies from both sides will be essential to mitigate potential economic repercussions.
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