The latest report from the High Commissioner for Strategy and Planning points to an epic industrial battlefront between Europe and China. Since the early 2010s, Beijing has refocused its industrial strategy to move upmarket in high value-added sectors such as electric vehicles, batteries, robotics and pharmaceuticals. The scale effect of that strategy is breathtaking: China now represents about 30% of global manufacturing output, while the European Union produces only about 15%. Backed by a vast domestic market and colossal investment, factory China is flooding the planet with its products and posting record trade surpluses.
Above all, Europe's traditional argument - higher quality justifying higher prices - is eroding dangerously. At equivalent quality, Chinese products cost 30% to 40% less to manufacture than those of European industry, according to the report. Such a gap can no longer be offset by simple productivity gains or incremental innovation: Europe risks getting stuck in a spiral in which its products, even at the high end, become too expensive when faced with Chinese competition that is technically mature and unbeatable in terms of prices.
This formidable competitiveness is no accident, but the result of a combination of structural factors. Chinese manufacturers can rely on:
- massive public investment and privileged access to credit
- durably lower production costs (energy, labour, inexpensive industrial land)
- ever more integrated value chains and huge economies of scale thanks to an immense domestic market
- a more flexible regulatory framework, with fewer social and environmental constraints
- and a persistently undervalued currency, which boosts export pricing
The result is a true industrial juggernaut. Fuelled by a weak yuan and by excess production capacity geared towards exports, China has entered its fifteenth 5-year plan (2026-2030) while once again placing manufacturing output and technological upgrading at the very top of its priorities. For Europe, the danger is no longer theoretical: it is already showing up in shrinking market share and factories going dark.
European strongholds shaken on two fronts
The specific feature of the current shock is that it is hitting Europe on two fronts at once. On the one hand, in international markets, European products are increasingly facing Chinese competition, and more than a quarter of exports from the EU's major economies are now threatened by Chinese rivals. On the other, within Europe's own domestic market, Chinese goods are rapidly gaining ground: up to 55% of the EU's manufacturing output could be exposed in the medium term if current trends continue. This exposure is particularly high in Germany (about 70% of its output at risk), Italy (60%), Spain (50%) and France (36%). In other words, no industrialized country on the continent is sheltered.
Map 1 - Share of European exports threatened by Chinese competition (%)
aggregated for each country.
Above all, Chinese competition is now targeting the heart of Europe's industrial bastions. It is no longer limited to plastic toys or cheap textiles. Automotive, chemicals, machine tools, pharmaceuticals: these flagship sectors of the European economy are now directly in the crosshairs.
Automotive and batteries on the front line
The automotive sector alone embodies the shift that is underway. China represents nearly 40% of global vehicle production and, in the space of a few years, has become the world's leading car exporter, notably in electric vehicles. At the same time, Europe's automotive export surpluses - especially Germany's - are melting away. Nearly 13 million direct and indirect jobs depend on the automotive value chain in Europe, now threatened by a wave coming from the East. In France, over 70% of cars assembled in the country and sold abroad are now considered to be at critical risk in the face of Chinese competition.
Another strategic sector, batteries starkly illustrate Europe's reversal of fortune. Identified as key to the energy transition, the battery industry has been hit by two successive waves of Chinese competition: a first in the 2000s, then a second, far more intense wave at the end of the 2010s. China is now gaining market share at a dizzying pace, to the point that its battery exports clearly exceed European volumes in many global markets.
Graph 9 - Acceleration of Chinese battery imports since end of 2010s (exports
in billions of euros)
HSCP
Germany at the heart of the industrial earthquake
Overall, Germany appears as the epicentre of the quake shaking European industry. Long the industrial engine of Europe, it is now proving the most vulnerable to China's move upmarket. Since 2023, Germany has lost about 240,000 manufacturing jobs. The pillars of its model - machine tools, production equipment, chemicals - are being hit head-on by competition from Chinese factories.
In all, the report estimates that 32% of German exports and nearly 70% of its manufacturing output are directly threatened in the medium term. While France appears somewhat less exposed (about 26% of its exports and 36% of its output under Chinese threat), the picture remains alarming for all.
Graph 6 - Strong continued growth of Chinese exports
of machine-tools since year 2000 (exports in billion euros)
Europe is falling behind in technological terms
This alarming situation raises the question of how to respond. Yet the trade-defence tools available to Europe today are widely seen as far too weak to match China's strategy. The HCSP report is unequivocal: the current arsenal, too sector-specific, reactive and fragmented, cannot answer a global and systemic industrial offensive. The example of solar photovoltaics is cited as a stark warning. Europe once had a competitive solar industry, but in just a few years Chinese capacity swept it from the global market - well before European defence measures (anti-dumping tariffs, etc.) produced any effect.
Despite some initiatives - whether tighter screening of foreign investment or promoting a "European preference" in public procurement - the High Commissioner considers these measures will not be enough. Useful for supporting certain strategic sectors, a Brussels-style "Buy European Act" remains far too limited to contain such a systemic competitor.
30% in tariffs or 30% less euro? Two options to avert a crash
Given the urgency, the report calls for a complete shift in paradigm. It explores two break scenarios intended to neutralise China's competitive edge. The first would be a major move: building a European tariff wall. Concretely, it would mean imposing the equivalent of a general customs duty of about 30% on all products imported from China. Such a tax, unprecedented in scale, would aim to offset the 30% to 40% cost gap observed on the ground. The stated goal: to restore fair competition for European producers by making Chinese goods expensive enough for "made in Europe" to become competitive again on the domestic market. Such a radical step obviously raises diplomatic and economic challenges, but its supporters argue it could abruptly halt the spiral of industrial decline.
The second option is macroeconomic. It would involve significantly devaluing the euro against the Chinese currency. The report cites a 20% to 30% depreciation of the euro versus the yuan. A weaker euro would give European exporters a major boost by making their products cheaper abroad, while Chinese imports would mechanically become more expensive for EU consumers. Such a strategy would, however, require flawless coordination amongst euro-zone countries, as well as careful management of the consequences (imported inflation, trade tensions, etc.). Above all, whichever option is chosen, it would only make sense if Europe presented a united front. The aim is to build credible leverage vis-à-vis Beijing, by recalling that the European single market - and its 450 million consumers - remains the ultimate negotiating lever the EU has to command respect.
Final word
China's offensive poses an existential challenge to Europe's economic power. "How can Europe remain an industrial power when China now produces comparable quality at significantly lower cost?" the High Commissioner's report asks. The time has come for Europeans to choose their destiny. In other words, Europe must decide whether it will simply submit to the laws of global competition, or organise to actively defend its vital interests.
There is urgency because the Chinese "juggernaut" is not slowing down - on the contrary, it is gathering force. Any response will likely be difficult and costly, and will require political unity that will not be easy to achieve. Failing that, Europe could find itself relegated to second rank, dependent on foreign technologies and products for its most basic needs.
