France and Germany are advocating for a more robust European Union strategy to counter China’s expanding trade surplus and industrial overcapacity, amid mounting concerns over the strain on European industries.
The matter gained renewed attention following an agreement between President Emmanuel Macron and Chancellor Friedrich Merz to develop a “Franco-German roadmap” by September, outlining EU responses to China’s trade policies.
This initiative builds on a recent analysis by France’s High Commission for Planning, titled “The Chinese steamroller: quantifying the systemic threat to Europe’s industrial base,” which characterizes China’s industrial expansion as a “systemic shock” to Europe’s manufacturing sector.
The report highlights that China’s blend of large-scale production, low costs, overcapacity, and swift technological advancement is transforming global industry and undermining Europe’s competitive edge.
It states that nearly 25% of EU exports face significant Chinese competition, with up to 55% of European manufacturing output—including automobiles, batteries, chemicals, and machinery—potentially at risk in the medium term if current trends persist.
The EU’s 2019 Strategic Outlook had previously categorized China as a “systemic rival,” a designation that reflects ongoing tensions in the relationship.
The World’s Factory
EU trade imbalances with China intensified after the country’s 1979 economic liberalization, positioning itself as the “world’s workshop” through coastal manufacturing hubs while encouraging Western firms to offshore production.
The trade gap surged after China joined the World Trade Organization in 2001, with its exports increasing fivefold. A Council on Foreign Relations report notes China’s rise to become the world’s top exporter.
However, imports from the EU and Western nations into China have not kept pace. The current EU-China trade deficit stands at €360 billion annually in China’s favor.
A report by France’s Commission for Planning emphasizes that the production cost disparity between China and Europe is often insurmountable through innovation or productivity improvements alone.
It further argues that existing EU trade defense mechanisms are insufficiently agile and cohesive to address China’s long-term industrial strategy.
Despite these challenges, divisions remain: France has historically pushed for a firmer stance toward China, whereas Germany has adopted a more cautious approach due to extensive commercial ties—Germany remains the EU’s largest trade partner with China.
