In the dragon’s mouth: European reliance on China

‘China shock’ is no longer a warning but a description: where Europe once relied on Chinese factories for toys and cheap clothing, it now relies on them for much more. China leads the green transition in EVs and solar panels, and pioneers the heavy industry like shipbuilding and tunnel boring to rare-earth refining. Of the cars on European roads today, one in seven will be Chinese EVs. Ford’s CEO has only rave reviews for the Xiaomi he drives – an imported model despite the near-prohibitive US tariffs. China may even overtake the US in AI, quantum computing, and nuclear power.

Like any chemical reaction, Europe’s dependence built slowly, until a catalyst arrived. Trump is unlikely to appear on the periodic table, but his effect on global trade is the same.

Beijing’s pragmatism, long-termism, and stability, free from Trump’s taunting and chauvinism, look increasingly attractive

Under the most erratic and isolationist US administration in living memory, once-firm American allies are turning to China for growth. Mark Carney, who urged middle powers to unite against superpowers, has met Xi Jinping, as have the British, German, and French leaders. Beijing’s pragmatism, long-termism, and stability, free from Trump’s taunting and chauvinism, look increasingly attractive. But China brings its own problems: surveillance, human rights abuses, and dependence on a one-party state. This article asks why Europe has been pushed into China’s arms, and what that means.

Since its market reforms, China has been at the centre of global manufacturing. Firstly, while Europe and the US led in advanced innovation, China had vast pools of cheap labour and simple goods. But that has changed for the better still. BYD, JAECOO, DJI, and JinkoSolar show China has climbed the value chain, helped by high-speed rail, 5G, and a state emphasis on engineering education. The old symbiosis, with European advanced goods flowing east and Chinese exports flowing west, has given way to Chinese dominance of supply chains, from raw materials to former European strongholds like automobiles and pharmaceuticals.

China stays steady and transactional, pursuing the trade and growth the CCP treats as a pillar of its domestic legitimacy

This predates Trump. Biden’s ‘Build Back Better’ was an attempt to position the US against China in these industries, and Janet Yellen warned that Chinese imports risked “decimating” US manufacturing. But with Trump’s return, a cohesive US economic strategy has been replaced by a hostile, nationalistic president who delights in insulting allies and praising America’s enemies. Each time Trump threatens to annex Greenland, suggests Taiwan should defend itself, or insults Zelensky, China stays steady and transactional, pursuing the trade and growth the CCP treats as a pillar of its domestic legitimacy. Add Europe’s own weaknesses, from high energy costs to a thin domestic technology sector and advanced manufacturing that cannot scale quickly, and China’s pull is catalysed by a US that no longer sees Europe as a partner and ally but as a land of expensive DEI wokery.

As China grows its share of global pharmaceutical manufacturing, Europe faces a competitor it seems unable to limit

To see what this means for Europe, look at one of the industries that has defined its post-war economy: pharmaceuticals. European firms have delivered everything from COVID vaccines to Ozempic. Yet as China grows its share of global pharmaceutical manufacturing, Europe faces a competitor it seems unable to limit. China now dominates not merely the supply chain but the end product.

Generics are probably the medicines you know best: ibuprofen and metformin are examples. Once a drug’s patent expires, competitors can replicate it, ending the monopoly on these ‘blockbuster’ drugs and cutting profitability. Around 80% of European pharmaceuticals are such drugs, and China increasingly dominates their supply chain, which cannot be tariffed out of competition. Over a third of European generics depend so heavily on China that disruption would cause “severe consequences”. Clinical testing is three times faster in China than in Europe, backed by over $4 billion in investment and a 175% increase in R&D tax rebates. Little wonder 11 EU health ministers have warned of the danger of this reliance.

This threat is no longer theoretical. Between 2015 and 2025, Europe’s share of global manufacturing fell by 10%. Danish giant Novo Nordisk’s share price has fallen 70%, with factories reportedly closing. China’s advantages are structural: deep vertical integration and domestic supply chains, deliberate export-led policy, and an education system built for a STEM-based economy. Worse, Europe cannot simply cut China off with tariffs and import bans. Doing so would risk harming its own populations by severing crucial medical supply chains, or undermining political goals such as the green transition via Chinese EVs.

China is a threat to Europe not only in its traditional industries but through the reliance Europe now places on an uninterrupted stream of Chinese imports, and that threat is growing

Western expectations that China would remain a source of low-value, labour-intensive production have been reversed. China is a threat to Europe not only in its traditional industries but through the reliance Europe now places on an uninterrupted stream of Chinese imports, and that threat is growing. Every day Europe sits on its hands, China advances, with new innovations in battery technology or drug compositions. Dramatic change has been announced, and the EU promises to ‘pull out all the stops’ to reduce this reliance. Time will tell whether Europe can emerge as a third pole of the global economy, self-reliant and sovereign on economic matters.