European Union national leaders have asked Brussels to come up with new trade instruments to deal with the economic threat posed by China, following a rare summit debate about Beijing late on Thursday night.

After a two-hour discussion, the EU’s executive branch was told to engage with China to try to fix the persistent trade problems, according to a Brussels official.

But it was also instructed “to develop and eventually complement the toolbox in the area of trade defence and industrial policy – to make sure the EU has all the instruments it needs to defend its interests and de-risk”.

The commission is now expected to prepare new tools aimed at countering Chinese industrial overcapacity and compelling European companies to diversify their supplier base, as it looks to wind down overdependence on the world’s second-largest economy in critical sectors.

It is expected that there will be a more robust use of existing tools as well, including safeguard measures, which can see tariffs and quotas slapped on entire sectors.

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“Leaders agreed that the current global macroeconomic imbalances require a European response based on two pillars: European unity and dialogue with our main economic partners,” an official said, adding that “fair competition requires a level playing field”.