“Instead of embracing China like the US did, Europe has chosen to ’embrace China’ .” Why?
On June 23, the website of the Wall Street Journal analyzed Europe’s choices in an article titled“Europe’s response to the China Shock: Embracing China.”. The excerpts are as follows:
In the face of the ongoing Chinese onslaught, Europe is not simply imposing higher trade barriers on Chinese imports, as the United States has done, but is seeking an alternative: rolling out the red carpet to welcome China.
European officials have been largely supportive of investment by Chinese battery makers such as Ningde times and have welcomed it from Chinese electric car makers, including Jády’s Hungarian investments and Chery’s Spanish investments.
According to data from the Mercator China Research Institute and rhodium consulting company in Germany, Chinese acquisitions of European companies have fallen sharply in recent years as a result of increased scrutiny in Europe, but greenfield investments-new businesses or factories-are growing fast.
European Union regulators said this month they planned to impose relatively modest tariffs on Chinese car imports — compared with the 100 percent tariff recently announced by the Biden Administration, the EU’s top tax rate is less than half that.
For the Europeans and Chinese, closer co-operation is a hedge against a possible return of Donald Trump to the White House.
Donald Trump has said he would impose a 10 per cent across-the-board tariff on all US imports. This amounts to a threat to Europe not to fully align itself with the United States.
As a result, Europe’s industrial technology ties with China are expected to become closer, while those with the US will be further weakened. Chinese brands will play an increasingly important role in Europe but not in the US.
Jacob Kirkegaard, a senior fellow at the Peterson Institute for International Economics, said the EU’s approach was to “Acknowledge the existence of sino-european industrial complexes” and “Explicitly encourage” their development.
This poses risks for Europe, says Noah Barkin, a europe-china expert at rhodium, a consultancy, “If the European car industry remains deeply integrated with China and the US car industry is completely decoupled from China, this is likely to lead to tension between the EU and the US.”. In fact, Europe exports nearly twice as much to the United States as to China.
Why Risk It? The European auto industry is deeply intertwined with the Chinese auto industry through joint ventures, which have a large share of the Chinese market. About a third of VW’s sales and most of its profits come from China.
Moreover, Europe would lose more than the US if the global trading system collapsed. The former Italian Prime Mario Draghi said in a speech this month that European manufacturing jobs are two and a half times those in the United States and that more than a third of manufactured goods are exported, in the US, the figure is just one-fifth.
Manufacturing accounts for 15 per cent of European output, up from 18 per cent in Germany and just 11 per cent in the US, reflecting European specialisation in high-tech engineering tools and machinery. But in areas where China used to source from Europe, its own competitiveness is growing. Chinese companies now produce more industrial machinery and equipment than the United States, Germany and Japan combined.
China has previously welcomed foreign investment as a way to introduce new technology. “We are now in a situation where the Europeans are keen to import technology from China and technology transfer is going in a different direction,” Barkin said
Some analysts say allowing Chinese automakers to grow in Europe could help European automakers by encouraging more people to switch to electric cars and encouraging governments to build charging infrastructure. Another advantage is that the U. S. electric vehicle market is likely to lag behind Europe and China, with poorer technology and higher prices.