Europe finds itself in the midst of a new economic challenge posed by China’s growing influence in its industrial sector. Trade experts are expressing concerns of potential job losses and the increasing dominance of Beijing in European industry. This situation draws parallels to the “China shock” experienced by the United States around 25 years ago when China’s entry into the World Trade Organization led to a significant surge in imports, causing local industries to suffer and resulting in the loss of millions of jobs.
Jens Eskelund, president of the European Chamber of Commerce in Beijing, highlights that the main issue is not merely the import of finished goods like electric vehicles from China, but rather the vast volume of components being imported. This dependency on Chinese components is embedding deeper into the EU’s industrial framework, pushing the bloc towards difficult decisions. Reports suggest that the EU is contemplating measures to mandate European companies to source critical components from multiple suppliers to mitigate over-reliance on China.
At an upcoming meeting on May 29, European commissioners will discuss potential strategies to tackle this growing issue. Oliver Richtberg from VDMA, a European machinery and equipment trade organization, has praised Brussels for its proactive approach but criticized Berlin for its lack of engagement. Richtberg points out that while state subsidies in China make their products cheaper, the undervaluation of the yuan against the euro, by as much as 40% over the past five years, leaves European procurement managers with tough choices. He warns that this reliance on cheaper Chinese imports is significantly impacting European market share and causing job losses, notably in Germany’s machinery industry.
According to data compiled by Soapbox, a China trade watch site, the threat of industry cannibalization is very real. For instance, while 52% of amino acid ingredients imported by the EU come from China by value, the volume figure soars to 88%. Similarly, 96% of polyhydric alcohols, used in various products, are sourced from China. This reliance risks rendering EU production uneconomical and could deepen dependency on Chinese imports. With China now being Germany’s top trading partner, the country’s trade surplus with Germany has notably doubled, reflecting the shift in economic dynamics.
In response to these challenges, the EU is considering legislative measures such as the Industrial Accelerator Act and an updated Cyber Security Act to protect its industry. However, these will not be effective until 2027, leaving an immediate gap that needs addressing. Andrew Small from the European Council on Foreign Relations underscores that the EU’s current tools are inadequate for the scale of imports, and the political will to impose further tariffs is lacking. Meanwhile, China continues to influence the situation by potentially complicating the EU’s countermeasures to maintain the flow of its exports to Europe.