The President of the China-EU Chamber of Commerce, Jens Eskelund, has issued a grave warning regarding the potential future of European manufacturing. He stated that if the current trends persist, European manufacturers may abandon competition with Chinese enterprises before the year 2030. The Chinese government has long implemented industrial policies, subsidies, and tax incentives to bolster its manufacturing sector, intensifying competitive pressure on European industries. Consequently, this situation poses significant risks for Europe, including the potential relocation of manufacturing jobs and widespread unemployment.
During a recent meeting in Brussels with officials from the European Commission, Eskelund emphasized that Europe stands at a critical juncture. He cautioned that a continued decline in manufacturing could lead to a breakdown of tax revenues, intergenerational unemployment, and rising social welfare expenditures.
Eskelund articulated a striking concern: “If a situation arises where trade creates considerable value for one side while simultaneously destroying value for the other, nations will begin to question: Why are we trading at all?”
He brought attention to the reality that since the Chinese government established its “Made in China” strategy in 2015, each subsequent five-year plan has prioritized the replacement of imports with domestically produced goods. Once Beijing sets industrial objectives, local governments promptly roll out incentives, tax cuts, and subsidies, reaching from urban centers to rural areas.
Expressing his views on the rising concerns regarding China’s competitive practices, Eskelund remarked, “I am not particularly fond of the term ‘China Shock 2.0,’ because the unfolding events should not come as a surprise. Everything is laid out in their five-year plans, allowing for foresight.”
A Goldman Sachs report has predicted that by the end of this decade, competitive exports from China could reduce the European Union’s Gross Domestic Product (GDP) by 0.5%, with Germany facing an even steeper decline of up to 0.9%.
The German automotive industry is currently grappling with a decrease in profitability from the Chinese market, alongside the pressures from Chinese automakers such as BYD, Geely, and SAIC, who are competing aggressively in Europe with lower prices. BMW has reported a 22% drop in sales in China during the first nine months of the year and has issued a second profit warning for 2023.
In response to a saturating market in China, some European companies operating there are beginning to leverage the Chinese supply chain to distribute their products on a global scale. This strategic adjustment has led to a renewed sense of confidence among many chamber members over the past year.
According to analysis conducted by the Mercator Institute for China Studies (MERICS), based on Chinese customs data, the EU recorded a trade deficit of €36.5 billion with China in July alone, averaging approximately €1.18 billion (or £1 billion) per day.
On October 16, Ursula von der Leyen, President of the European Commission, acknowledged that although an agreement had been reached with Beijing to reduce imports of hybrid vehicles from China, these measures were insufficient to address the structural trade imbalance. She reiterated that the EU would propose additional import safeguard measures.
Von der Leyen stated, “Our industries have called for action, and we have heard their calls. We will respond, including implementing further safeguard measures.”
Furthermore, a recent statement from the European Parliament on October 29 indicated that lawmakers visiting China expressed concerns over issues such as overcapacity in Chinese industries, the unpredictability of supply chains, and barriers to market access for foreign companies.
In an effort to combat these challenges, on October 30, the EU announced the imposition of final anti-dumping duties ranging from 39.8% to 48.1% on imported PET nonwoven fabrics from China, effective for the next five years.
Simultaneously, France and Germany are advocating for a new trade defense mechanism referred to as the “Kill Switch.” This tool would enable the EU to swiftly restrict access to the single market for countries that engage in systemic market distortions or unfair trading practices. However, this mechanism is still in the drafting stage and has not yet become official legislation.