Economic relations between the European Union and China have undergone a radical transformation recently, shifting from a "strategic partnership" to one of "cautious competition." The term "De-Risking" has become the cornerstone of European economic policy toward Beijing. This strategy, adopted by the EU under the leadership of the European Commission and supported by leaders in France and Germany, aims to reduce over-reliance on China in vital supply chains without succumbing to the "decoupling" that economists consider disastrous for the global economy.
A deeper analysis of this strategy reveals multiple and interconnected motivations. First, there is the geopolitical motive: the COVID-19 pandemic and the war in Ukraine demonstrated that dependence on a potential adversary for essential goods is a strategic vulnerability. Europe recognizes that China is not merely a trading partner, but also an ideological and political rival. Therefore, maintaining the EU's independence in sensitive areas such as defense, energy, and digital technology has become paramount. Second, there is the economic motive: Chinese trade practices, including massive government subsidies for domestic companies, forced technology transfers, and an uneven playing field, have created a significant trade imbalance in Beijing's favor.
One of the most contentious issues in this context is the electric vehicle market. Chinese companies (such as BYD and SAIC) dominate the market thanks to advanced technologies and highly competitive prices, supported by direct government subsidies. The European Union is currently considering imposing anti-dumping duties, fearing a repeat of the fossil fuel car scenario, where Asian companies dominated the European market for years. This European move not only prevents imports but also sends a clear signal that Europe will defend its manufacturing sector, the backbone of the European economy, regardless of the trade provocations involved.
However, implementing a "de-risking" strategy is no easy task. The Chinese market remains the largest market share for many European companies, especially luxury car manufacturers, chemical companies, and equipment technology firms. Exiting the Chinese market could lead to massive profit losses, potentially impacting these companies' ability to innovate and invest in Europe. Herein lies the dilemma: European companies want protection, but they also want to maintain access to the huge Chinese consumer base.
A practical solution being discussed is the "China+1" strategy. This strategy means that European companies maintain their presence in China but open alternative production lines in other Asian countries (such as Vietnam or India) or in geographically closer countries (such as Turkey and Morocco). This diversification reduces risks in the event of supply chain disruptions from China and provides a less costly alternative to production in Europe itself, which suffers from high energy and labor costs.
Furthermore, the issue of raw materials (critical minerals) cannot be overlooked. Europe recognizes that the green transition (electric vehicles, solar energy) requires vast quantities of lithium, cobalt, and rare earth elements, the processing of which is dominated by China. The European Union’s recently adopted Critical Raw Materials Act aims to develop mining and processing within the continent or with reliable partners, to avoid Europe becoming dependent on Beijing’s supplies in its pursuit of climate goals.
The relationship between Europe and China is entering a phase of redefinition. This is not a return to the Cold War, but rather a period of “turbulent negotiation.” Europe is trying to walk a tightrope: protecting its values and security interests without completely closing its doors to the world's largest market. Success in this equation will depend on the EU's ability to unify its 27 member states, preventing Beijing from exploiting disagreements between them, while also requiring significant investment in innovation and artificial intelligence to maintain its technological edge.
