The Chinese Steamroller: Quantifying the Systemic Threat to Europe’s Industrial Base

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The report makes an original contribution by objectively assessing the scale and systemic nature of the Chinese industrial shock for Europe. 

Chinese pressure is no longer confined to low value-added segments. It now affects the core of Europe’s industrial strongholds: automotive, batteries, industrial equipment, chemicals, and others. On average, nearly a quarter of European exports is currently exposed to Chinese competition that we deem critical. On the domestic market, up to 55% of European manufacturing output could be threatened over the medium term if current trends persist. This proportion varies significantly across countries: it reaches around 70% in Germany, 60% in Italy, 50% in Spain and 36% in France. This dynamic is exacerbated by the fact that Chinese competition now directly targets Europe’s comparative advantages, thereby increasing the risk of structural downgrading.

Cost differentials are a determining factor in understanding the nature of this competition. At comparable quality, they are estimated by interviewed industrial stakeholders at around 30% to 40%, and sometimes more depending on the sector. The European productive apparatus is thus exposed to an unprecedented form of competition, as China is able to produce at least equivalent quality at markedly lower costs. Such gaps cannot be offset in the short term by upgrading alone, innovation or productivity gains. They expose European industry to a risk of rapid and irreversible market exit.

The precedent of the photovoltaic sector is a textbook case. Within a few years, a European industry that had a competitive edge was marginalised by the rise of Chinese production capacities, before trade defence instruments could produce their effects. Several European industrial sectors today display characteristics similar to this trajectory, with a risk rapidly tipping toward a lasting loss of productive capacity.

In this context, existing trade defence instruments, while useful, appear structurally insufficient. Their sectoral, reactive and fragmented character does not allow them to respond to a global and long-term Chinese strategy. European preference is relevant in supporting certain strategic sectors, but does not constitute a sufficient response to systemic competition.

The report therefore identifies a strategic choice for Europe: either pursue an incremental approach, at the risk of accelerated deindustrialisation, or change our paradigm. Two defining levers are discussed: establishing a level of protection equivalent to a general tariff of around 30% vis-à-vis China, or a macroeconomic strategy aimed at achieving a significant depreciation of the euro against the renminbi. These options require, as a prior condition, the construction of dialogue and a credible negotiating position with China, notably based on the Union’s ability to condition access to its internal market.

Chinese competition no longer constitutes a sectoral shock but a central issue of economic and industrial sovereignty for Europe. Without a rapid strategic inflection, the risk is lasting industrial decline, with major consequences for employment, territorial cohesion and the Union’s capacity to remain a leading economic and technological power.

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