Europe is experiencing a new wave of economic challenges attributed to China, which could potentially disrupt local manufacturing sectors and lead to significant job losses, according to trade experts. This situation echoes the “China shock” faced by the United States 25 years ago, when China’s entry into the global trade arena led to the displacement of local industries and a loss of approximately 2.5 million jobs. Jens Eskelund, president of the European Chamber of Commerce in Beijing, highlighted the increasing dependency on Chinese components, which is becoming a critical concern for the European Union’s industrial base.
The European Union is now contemplating strategic measures to mitigate this dependency, such as requiring companies to source critical components from multiple suppliers. This decision comes amid discussions scheduled for May 29 by European commissioners to address these pressing issues. Oliver Richtberg from VDMA, a trade organization for the machinery industry, praised the EU’s proactive approach, though he noted a lack of similar initiative from Berlin. He pointed out that state subsidies in China make their products cheaper, and the undervaluation of the yuan against the euro forces European procurement managers to choose Chinese products over local ones due to cost-effectiveness.
Data from trade analysts suggest that Europe is at risk of industrial cannibalization, with a significant portion of essential imports coming from China. For instance, the EU imports 88% of amino acids and 96% of polyhydric alcohols by volume from China, which are critical for various industries. The growing trade surplus China holds over the EU is expanding, with the impact of EU tariffs on Chinese electric vehicles being negated by unfavorable exchange rates. Andrew Small from the European Council on Foreign Relations noted that current EU measures are insufficient to address the scale of imports from China.
Germany, in particular, is feeling the impact, having lost around 250,000 industrial jobs since 2019, with car manufacturing being the hardest hit. Jens Eskelund expressed concerns about the existential threat posed by increasing reliance on China, noting that a significant number of businesses are expanding their presence in China. This trend could potentially evolve from an economic concern to a security issue for Germany. Despite legislative proposals like the Industrial Accelerator Act and updates to the Cyber Security Act, these measures won’t take effect until 2027, leaving the EU under pressure to find immediate solutions.
Amid these developments, the EU’s relationship with China remains complex, as any new measures will have to be delicately balanced against potential Chinese retaliation. Andrew Small emphasized that although the EU has various countermeasures at its disposal, China’s strategic maneuvering could hinder their effectiveness, maintaining the flow of Chinese exports to Europe.