China is a threat to Europe: How to secure industry?

In 2019, China became the world's largest supplier of patents, overtaking the US and Japan. The Chinese government's strategic initiatives such as "Made in China 2025" or the artificial intelligence development plan until 2030 demonstrate China's continued commitment to innovation and technological growth. Moreover, the New Silk Road, designed to connect China to Europe economically by linking Central Asia through an extensive network of road, rail and sea corridors, will boost the country's exports and help it find new markets.

China's threat to the EU

Faced with increased competition, Europe faces a number of challenges. In the short term, falling prices for manufactured goods from China, driven by industrial overcapacity and massive investment, are putting pressure on European businesses. In particular, the solar energy sector requires emergency measures to combat the import of underpriced Chinese panels. The market-driven nature of the Chinese industry could thus reduce the market share of European products, especially in the key sectors of renewable energy and electric vehicles, AI and biotechnology. Faced with this threat, Europe did not hesitate to begin investigating Chinese export subsidies for battery electric vehicles (BEVs) in 2023. According to the Chinese Foreign Ministry, such measures are "purely protectionist".

Sustainable EU industry

To protect and develop its industry, Europe wants to invest heavily in research, innovation and the development of advanced technologies. With this in mind, the European Council and the European Parliament recently reached a provisional agreement on a regulation for a "zero-based" industry. This regulation is designed to incentivize the production in Europe of the low-carbon technologies needed to meet EU climate goals. The aim is to cover 40% of the Union's deployment needs for technologies produced within its territory by 2030. To achieve this goal, the regulation provides for a simplified regulatory framework and intends to offer investors flexible and safe conditions. Projects recognized as having the greatest potential for decarbonization will receive accelerated procedures for granting construction or expansion permits.

New economic security package

At the end of January 2024, the European Commission also adopted an economic security package in line with the European Economic Security Strategy presented in June 2023. Although the package was criticized for being too vague, it drew a strong reaction from China. Foreign Ministry spokesman Wang Wenbin urged Europe not to adopt "anti-globalization" measures. There are good reasons for this - the package is designed to filter foreign investment in key sensitive technologies such as artificial intelligence, advanced semiconductors, the quantum industry and biotechnology. The package is also designed to better identify potential security risks associated with investment leaving the EU.

Against a backdrop of heightened geopolitical tensions, the EU also intends to improve export controls on dual-use goods - civilian and military. The legislation also calls on the European Council to recommend specific measures to "strengthen the security of scientific research" across the Union. While China is intensifying its partnerships, Europe also intends to strengthen international cooperation, strategic partnerships, and international trade agreements with as many countries as possible.

Finally, Europe is working on a regulation that would ban products made with forced labor from the EU market. According to the International Labor Organization (ILO), some 27.6 million people are forced to work against their will, including 15.1 million in the Asia-Pacific region. The Council adopted its position on January 24. MEPs hope that a regulation on products made with forced labor will be adopted before the European elections in June.

EU dependence

John Seaman, an expert on the geopolitics of energy resources at the French Institute of International Relations (IFRI), draws attention to the peculiarities of Europe's current geopolitical context. He notes that as the EU approaches major structural changes, including the transition to sustainable development and Green technologies, the region's dependence on other countries and their resources is becoming more and more tangible. The problem is that these countries can use this dependence as a means of pressuring the EU against the backdrop of global problems and conflicts.

Europe is heavily dependent on other countries for raw materials that are used to produce a range of market-critical goods: phones, electric cars and semiconductors. For example, China supplies 100% of heavy rare earth elements, Turkey 98% of boron and South Africa 71% of platinum. Ongoing transformations, especially in the transition to electric vehicles, solar power and renewable energy, have emphasized Europe's dependence on one source in particular, China.

The European Union will face even stiffer competition from China in the future, which requires the development of new strategies and approaches. It can be said that despite concerns about China's growing influence on European industry, the share of Chinese capital in advanced industries is only increasing. In addition, China's expansion into underdeveloped regions of the world - Africa and Latin America - poses a separate challenge for Europe, which also threatens the economic interests of the United States and Europe.