ISTANBUL

European Commission President Ursula von der Leyen said the EU and China agreed Thursday to smooth rare earth export restrictions.

"We acknowledge China's efforts on fast-tracking licenses for the critical raw materials, and we agreed to have an upgraded export supply mechanism," von der Leyen said at a news conference with European Council President Antonio Costa following a EU-China Summit.

She said if bottlenecks arise, the enhanced supply chain support mechanism can quickly identify and resolve the issue.

"These export controls have placed significant strain on some European companies to keep trust in our trade relationship, we need reliable and secure supply of critical raw materials from China," von der Leyen noted.

She stressed that the bloc's trade deficit with China has doubled in the last decade, and urged a "balanced" trade so it can remain "mutual" and "beneficial."

"We discussed at length the issue of overcapacity in China's economy. In all the crucial sectors, like, for example, steel, solar panels, electric vehicles, batteries and others, the subsidized production does not match the domestic demand in China and therefore overcapacity produced here goes to other markets," von der Leyen added.

She explained that the more markets restrict Chinese exports, the higher the risk of trade diversion to the EU's single market.

"The Chinese leadership has started to look into this issue under the term involution, and expressed willingness to support more the consumption and less the production," said von der Leyen.

She reiterated a "clear … consistent” and "result-driven" European approach to defending its interests.

"We are carefully implementing a de-risking strategy, and we are strengthening our economic security and our competitiveness. Meanwhile, we remain committed to frank, respectful and open dialogue with China, and today's summit provided exactly that," von der Leyen said.