Europe is grappling with a renewed wave of economic challenges from China, which threaten to undermine local manufacturing sectors, potentially leading to job losses and increased dependency on Chinese industry. Trade analysts and industry representatives have raised alarms over similarities to the “China shock” experienced by the United States a quarter-century ago, where China’s entry into the global market through the World Trade Organization resulted in significant import surges that displaced local industries and led to substantial job losses.
Jens Eskelund, the president of the European Chamber of Commerce in Beijing, has highlighted a growing concern not with finished Chinese goods like electric vehicles, but with the sheer volume of components being imported from China. This dependency on Chinese components is becoming deeply rooted in the EU’s industrial fabric, prompting the bloc to consider compelling European companies to source critical components from a minimum of three different suppliers. The European Commission is set to hold an urgent meeting on May 29 to discuss potential measures to address these challenges.
One of the key issues exacerbating the situation is the significant undervaluation of the yuan against the euro, with estimates suggesting it could be as much as 40% undervalued over the past five years. This discrepancy provides Chinese products with a competitive edge, as Oliver Richtberg from VDMA points out, making it difficult for European industries to compete. The machinery and equipment sector in Germany alone has seen a loss of 22,000 jobs in the last year, highlighting the significant pressure on the industry. Data from trade watch platforms have revealed alarming statistics, such as the EU’s reliance on China for 88% of its amino acids by volume and 96% of polyhydric alcohols, raising concerns about the viability of EU production.
China’s trade surplus with the EU is expanding, with Germany now recognizing China as its top trading partner. The surplus doubled between 2024 and 2025, with significant job losses in sectors such as car manufacturing, where 51,000 jobs were lost within a year. Jens Eskelund points to a growing existential worry, as reliance on China increases and deindustrialization in Germany continues, posing potential security risks.
In response, the EU has proposed legislative measures like the Industrial Accelerator Act and updates to the Cyber Security Act, aimed at protecting European industry. However, these measures are not expected to take effect until 2027, placing immediate pressure on Brussels to devise short-term solutions. Andrew Small from the European Council on Foreign Relations underscores the limitations of tariffs and the need for more robust strategies, while cautioning against the likelihood of political pushback from China. As the EU navigates this complex economic relationship, China’s influence remains a significant factor in shaping the future of European industry.