De-Risking, the right way – Europe aims for a tougher China policy

A noticeable shift is occurring in Berlin and Brussels, as European leaders increasingly voice concerns about their trade relationship with China. The tone has sharpened, with many EU countries now viewing their economic ties with Beijing as problematic. New policy instruments are expected to be ready by autumn to address these growing issues.

German Chancellor Friedrich Merz has been particularly vocal, describing China's practices as 'unacceptable.' He cited issues such as unfair competition, massive overcapacity in Chinese industries, and the artificial undervaluation of the yuan. Furthermore, security concerns regarding critical infrastructure have added another layer to the complex relationship.

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unfair competition, massive overcapacities, a currency that is artificially undervalued.

While France has long advocated for a firmer approach, Germany had previously maintained a more cautious stance. However, a consensus has now emerged among EU leaders that China's export surge needs to be countered. This shift is reflected in a recent Bertelsmann Foundation survey, which found that 67 percent of Europeans perceive their countries as dependent on China. A significant majority, 77 percent, desire a reduction in this dependency, even if it entails short-term economic costs. In Germany, this sentiment is even stronger, with 80 percent favoring reduced reliance on China.

In response, the European Commission is set to present new measures by October. These may include targeted tariffs aimed at addressing overcapacity and incentives or directives for companies to diversify their suppliers. Reports also suggest the potential implementation of a solidarity mechanism to distribute the burden of any retaliatory actions from the Chinese government among member states, rather than leaving individual countries to face them alone.

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unacceptable