Illusory China 'threat' claim a classic own goal

European politicians, think tanks and media have been ramping up the narrative of so-called "trade imbalance", claiming that Chinese industrial subsidies, weak domestic demand and fierce domestic competition have created "overcapacity" and led to a widening surplus with Europe.

Chinese exports, according to them, are a "threat". The remedy from Brussels is "rebalancing" and "de-risking".

But when I sat down with European business leaders over the past months, I have heard the other side of the story, one of deepened commitment and, in particular, continued confidence.

For much of the past two decades, Europe exported high-end machinery, precision instruments, luxury goods and automotive technology. China exported consumer electronics, textiles and assembled manufactured goods. Each side occupied a distinct tier in the global value chain.

That era is over. China's manufacturing capability has made a huge leap into sectors that have long been Europe's industrial heartland — electric vehicles, batteries, renewable energy equipment, advanced machinery, and increasingly, semiconductors and pharmaceuticals.

Chinese companies are no longer just suppliers to European firms; they are now direct competitors in the same global markets. For many politicians in Brussels, this shift spells danger. But the European executives I spoke with see it differently. To them, competing in China is not a liability, but a proving ground.

"China is like a fitness club," Denis Depoux, global managing director at Roland Berger, told me. "Foreign companies have to be competitive, have to move quickly, and have to bring the most cutting-edge innovations to China," he said. "But if you can make it here, you can make it anywhere."

The very competition and cooperation that Brussels frames as a threat is, for European businesses, a source of global advantage. The pressure to innovate, the speed of iteration, the scale of the market don't weaken European firms; they sharpen them.

Rogier Janssens, president of Merck China, put it more directly."We look at China not just as a market," he said. "We see China as a production base and, in particular, a base for innovation."

He pointed to China's "2.0 version" of opening-up as "not just about enabling multinational companies to access the Chinese market, but empowering them to collaborate in innovation."

Business leaders I met are fully aware that in the industries that will define the next decade, China is not just a market to be accessed. It is a competitor to be matched, and a partner to be engaged.

Jean-Christophe Tellier, CEO of multinational bio-pharmaceutical firm UCB, told me: "Collaboration, AI, plus the culture and mindset of testing, experimenting, changing and pivoting, make me feel that if change comes in the future, it is likely to come from China."

As the world's significant economies, China and the EU are deeply intertwined. The real question is not whether to engage, but how to engage. European companies are already voting with their feet.

Joseph Cherian, president and dean of the Asia School of Business, noted that "Businesses can't afford not to be in China. Not because it's huge, but because it's very likely where the future is being shaped."

The question is whether Brussels will listen or continue to pursue a strategy that serves neither its industrial competitiveness nor its geopolitical interests.