Ever since China adopted the strategy that “it doesn’t matter what color the cat is, as long as it catches mice,” the Chinese industry has grown from a 2% share of the global market in 2001 to nearly 17% this year . It is expected that in 3 to 4 years, it will displace Europe from the top spot and become the world’s leading trading power, accounting for about 20% of total trade in goods and services.
This development will certainly be the hot topic at the upcoming G7 summit, hosted by France in Evian from June 15 to 17. "...China is putting undue pressure on Western and, in particular, European industry, and some countries are paying a heavy price...," emphasizes Belgian economist Raymond Grahoun, an export consultant for a major Belgian manufacturer.
On the other hand, international analysts estimate that China will export 10 million cars annually by the end of the decade. However, Chinese exports in the fourth quarter of 2025 have already reached that threshold on an annual basis. Last year, the volume of Chinese exports grew twice as fast as global trade, and this momentum strengthened further in the first quarter of 2026, with a 15% increase. Goldman Sachs reports that this wave could reduce German growth by 0.2 to 0.3% annually through 2029.
Another report, from the High Commission for Strategy and Planning, notes that Chinese competition could threaten up to 55% of European manufacturing output in the medium term—35% in France, 70% in Germany.
Europe can still react, says Sander Torndjord, chief economist at the Center for European Reform. “...But time is running out. And it will have to play other cards besides the Industrial Accelerator Act , because it has flaws...,” he adds.
Responding to a question from the French magazine “L’Express,” Sander Torndor points out that “...Chinese exports are once again rising very sharply. But imports are not following a similar upward trend. In terms of volume, they have increased only slightly over the past six years. In terms of value, manufacturing imports, including components, have remained stagnant for a decade.
With the exception of semiconductors, they have declined entirely. China simply does not share its domestic market with its trading partners. The result is clear: an increase of over $1 trillion in Chinese exports with no compensation for other countries and a trade surplus in industrial goods of approximately $2 trillion— an amount equivalent to Italy’s national income!...”.
This is a shock that bears no resemblance to the conditions of 2001, notes Torndor, emphasizing that the current pressure from China cannot be corrected through the usual mechanisms. In theory, an economy with such massive trade surpluses should see its currency appreciate, which would increase the cost of exports and boost imports.
However, this rebalancing is not happening: the Chinese central bank and state-owned banks are intervening massively to prevent any appreciation of the yuan. In reality, the shock we are experiencing is not the result of a natural comparative advantage, but the result of massive and deliberate distortions.
Subsidies are estimated at 4.4% of Chinese GDP according to the IMF, or about $800 billion annually. An artificially undervalued exchange rate of about 16% according to the same IMF, perhaps more in reality. And household savings are structurally very high, a fact that suppresses Chinese domestic demand and forces companies to export at any cost.
This shock is hitting European manufacturers onthree fronts simultaneously. First , they are being pushed out of the Chinese market, where production by domestic champions is replacing imports. Second, they are losing market share in third countries where China is gaining ground with cheaper products. Finally, they face increasing competition in their own domestic market.
This triple pressure is unprecedented. It leaves no alternative market. The consequences go far beyond the issue of the competitiveness of global production of automobiles, machinery, clean technologies, and semiconductors in China. Europe is exposing itself to a corrective dependency that Beijing can then use as a means of pressure. The Chinese authorities are already blackmailing us over the supply of rare earths.
A Europe that depends on China for these critical industrial inputs loses not only its economic sovereignty but also its ability to rearm! Another difficulty is that the rapid decline of entire industrial sectors does not necessarily lead to Schumpeter’s “creative destruction” —where new industries replace old ones. Without adequate safeguards to give industrial ecosystems time to reconfigure, plain and simple deindustrialization prevails: factories close, skills disappear, and the high-productivity industry that is supposed to take over never emerges.
The case of the German solar industry, which in 2010 relied on domestic components and now sources Chinese equipment, illustrates this dynamic in a striking way. The automotive and machine tool industries are also suffering the full brunt of China’s strategic dominance, and tomorrow it will be the aerospace industry’s turn!
It is clear, then, that European industry faces serious competitive pressures, which we will address in our upcoming article.