EU manufacturers could give up on competing with China by 2030, warns commerce chief

The EU is at an inflection point where the value of trade with China is increasingly questioned. Jens Eskelund, who heads the influential Beijing-based chamber, said European manufacturers could face an existential crossroads by 2030.

Speaking in Brussels after meetings with European Commission officials, Eskelund warned that if trade creates value for one party while destroying it for the other, nations will have to reconsider their economic policies.

Economic impact and supply chain shift

Eskelund suggested European countries may need to shift their policies to allow domestic manufacturers to become part of Chinese firms' supply chains rather than treating them as competitors. This shift could see a philosophy of "Made in China for the world" replace "Made in China for China."

He pointed to a report by Goldman Sachs that forecasted Chinese exports would lower the EU's gross domestic product by 0.5% by the end of the decade while reducing Germany's by up to 0.9%.

That report raises the question of why trade is necessary if it delivers negative value. Eskelund warned of a doomsday scenario where manufacturing disappears from Europe, leading to mass job losses, a collapse in the tax base, and spiralling social benefits costs.

Sector-specific warnings

The existential threat is already beginning to bite in Europe's car, chemicals, and renewable energy sectors. The German automotive industry has been hit by a double whammy of reduced profits in China and cheap competition at home from Chinese companies such as BYD, Geely, and SAIC Motor.

BMW reported a 22% drop in sales in China during the first nine months of the year, issuing a second profit warning for the year. This decline is in line with expectations of suppressed domestic demand.

Anticipating the shift

Eskelund is not a fan of the term "China shock 2.0" for the impact of Chinese exports on local industry. He argued that these developments should not have come as a surprise because Beijing's plans to displace imports are the enduring theme of the last three five-year plans since the Made in China strategy was agreed in 2015.

He noted that China has been laser-focused on reducing its own dependencies over the last 30 years, a trend accompanied by a concomitant reduction in imports.

Eskelund concluded that if Europe creates new dependencies, it risks losing its ability to determine its own future, a prospect that could lead to mass job losses and the fraying of communities.