Europe is grappling with a new wave of economic challenges emanating from China, which could severely impact local manufacturing sectors and result in job losses, according to trade experts. The concern echoes the “China shock” in the United States two and a half decades ago, when China’s integration into the World Trade Organization led to a surge in imports that displaced domestic industries and eliminated millions of jobs. Jens Eskelund, president of the European Chamber of Commerce in Beijing, highlighted that the real issue is not just finished products like electric vehicles but the vast influx of Chinese components into European industries, increasing dependency on China.
The European Union is now faced with crucial decisions as Chinese components become embedded in its industrial framework. Recent discussions indicate that the EU may require companies to purchase critical parts from diverse suppliers. This comes amid apprehensions over China’s state subsidies and a depreciating yuan, which has reportedly undervalued the Chinese currency by as much as 40% against the euro over the past five years. Jürgen Matthes, a German economist, warned that this exchange rate disparity leaves European procurement managers with few options but to choose cheaper Chinese products.
Germany’s machinery and equipment manufacturing industry, represented by Oliver Richtberg from VDMA, is particularly affected, having lost 22,000 jobs last year alone. Richtberg criticized the situation where Chinese suppliers offer products nearly matching European quality at significantly lower costs, a trend he deemed unsustainable and unfair. Reports from trade analysis platforms have substantiated fears of industrial erosion, with alarming statistics showing the EU’s reliance on Chinese imports for certain raw materials, such as amino acids and polyhydric alcohols, which far exceed domestic production.
China has now surpassed the US as Germany’s leading trading partner, with a surplus that has doubled in a year, reflecting a broader trend of job losses in German industrial sectors, notably in car manufacturing. Eskelund expressed concerns over the implications of increasing reliance on China, indicating that it could escalate from an economic to a security issue. Meanwhile, the EU has proposed legislative measures like the Industrial Accelerator Act and updates to the Cyber Security Act, but these initiatives won’t take effect until later this decade, leaving the need for immediate solutions.
Amid these developments, Andrew Small, director of the Asia program at the European Council on Foreign Relations, emphasized the inadequacy of current EU measures against high import levels from China. He pointed out the political challenges in implementing tariffs and noted that while the EU’s strategic responses are under scrutiny, China remains in a strong negotiating position, capable of obstructing new EU countermeasures to maintain its export flow. The situation demands urgent and strategic action from European policymakers to address the growing industrial dependency on China.