The blame for the European competitiveness crisis cannot be blamed on China

Recently, some European experts have interpreted the China Europe economic and trade friction as a "systemic competition": European companies are not only facing Chinese companies, but an economic system supported by so-called "large subsidies, low financing costs, and central policies". According to this logic, Chinese and European enterprises have been "not on the same starting line" from the beginning, and the decline in European competitiveness is largely due to the "unfair competition" and "dependence risks" brought by China.

This statement caters to the current anxiety in Europe about the so-called "China Shock 2.0", but cannot withstand a simple rhetorical question: if the crux of Europe's declining competitiveness really lies in China's economic system, why are European companies increasingly feeling powerless in the face of the United States, whose economic system and market rules are closer to their own?

Fair rules are necessary for trade competition, and industrial subsidies should also be subject to regulatory constraints. But for Europe, the real danger has never been to compete with China, but to secretly blame China for the deep-seated contradictions it has accumulated over the years, using China as a scapegoat for declining competitiveness. Those already urgent internal reforms may continue to be delayed.

The argument of "unfair system" by the European side cannot withstand the reality test of the gap between the United States and Europe.

In the perception of Europe, the United States and Europe implement similar market economy systems, and their industrial systems and capital allocation methods are also significantly different from China. However, Europe has also lagged far behind the United States in cloud computing, global Internet platforms, advanced chip design, artificial intelligence and other key areas that determine future competitiveness.

A set of data released by the International Monetary Fund earlier this year revealed this gap: the total market value of listed companies in the United States, which have been established for less than 50 years, is about $42.9 trillion, while similar companies in the European Union are only about $5 trillion. According to data from the European Central Bank in 2026, the total size of venture capital funds in the United States is approximately 930 billion euros, while in the European Union it is approximately 150 billion euros.

The United States excels in rapidly transforming emerging technologies into large-scale commercial enterprises through venture capital and capital markets. China continues to strengthen its manufacturing advantages, accelerate its transformation towards innovation driven, and climb towards the high-end of the industrial chain. The problem in Europe is that there are obvious shortcomings in both aspects.

Artificial intelligence is a typical example. According to Stanford University's "2026 Artificial Intelligence Index Report," by 2025, the United States will have launched 59 representative artificial intelligence models, China will have launched 35, and Europe will have very few. The United States attracted $285.9 billion in private investment in artificial intelligence, while Europe only received $20.9 billion. Such a huge disparity cannot be attributed to China.

The European Commission itself acknowledges that the main obstacles faced by European innovative enterprises include insufficient investment, shortage of technical talent, and market fragmentation.

When Europe questions whether competition with China is "fair" while also failing to open up its internal market, improve financing environment, and reduce expansion costs, the problem is already quite clear: many obstacles to the growth of European companies come from within Europe. The first issue that Europe faces is not the so-called fair competition problem, but the problem of institutional capacity.

For decades, Europe has been a beneficiary of 'Made in China'. A large number of high-quality and cost-effective Chinese products have reduced the cost of living for European consumers and helped European companies control production costs.

Nowadays, Chinese companies are rapidly rising in fields such as electric vehicles, batteries, renewable energy equipment, and robots, which are also key industries that Europe hopes to reshape its competitiveness in. The so-called 'China Impact 2.0' argument has heated up accordingly.

However, importing Chinese products cannot explain why Europe has not bred Internet platforms, cloud computing enterprises and artificial intelligence companies with global influence. The United States has also imported Chinese goods for decades, but has not lost its dominant position in these fields as a result.

The predicament that Europe is facing today is largely the result of its own long-term choices and accumulation.

Since the end of World War II, Europe has gradually established a social model of high welfare, strong labor protection, and strict regulation. This model has its value and profound social foundation, but maintaining this model requires sustained productivity growth as a support. Once productivity stagnates for a long time, the balance between welfare, wages, investment, and finance will become increasingly difficult to maintain.

The productivity "engine" of Europe began to slow down even before the first Chinese electric vehicle entered the European market. The OECD's Compilation of Productivity Indicators for 2026 shows that the hourly labor productivity of the European Union has decreased from approximately 90% of that of the United States in 2000 to 75% in 2024.

The development trajectory of the European automotive industry is particularly worthy of reflection. Former Australian Prime Minister Kevin Rudd's policy advisor, Bao Shaoshan, recently wrote that in the past decade, European car manufacturers have mostly returned to shareholders through dividends and stock buybacks, while relatively insufficient reinvestment has been made in vertical integration, battery capacity, and production automation. The data he cited shows that the capacity utilization rate of the European automotive industry has decreased from about 85% in the past decade to about 53% by 2026.

If a company reduces its investment in future technology and production capacity for a long time, but still hopes to maintain its past market position, then simply blaming competition for being "unfair" when competitors catch up cannot solve any problems.

Energy is another heavy cost on Europe's competitive ledger.

The report released by the International Energy Agency this year shows that by 2025, the electricity prices for energy intensive industries in the European Union will still exceed twice those of the United States and be nearly 50% higher than those in China.

Over the past few years, some European economies have developed a high dependence on imported natural gas, while actively contracting energy options such as nuclear power. Germany's withdrawal from nuclear power is a typical case. At the same time, Europe's advantages in clean technology supply chains such as solar energy and batteries are gradually being surpassed by China. These vulnerabilities existed before the outbreak of the Ukrainian crisis, and the crisis only further amplified the problem.

This creates an ironic situation: Europe's push for green transformation requires competitively priced Chinese clean energy products, while at the same time, there is increasing concern about dependence on these products.

But how to formulate approval rules, whether the investment in the power grid is sufficient, and how to design the energy structure are all choices made by Europe itself. It is not China that determines the electricity prices in Europe, but rather the policies of Europe over the years that have collectively shaped today's energy costs.

If these structural problems are not resolved, even if imports from China are reduced, European companies may not be able to regain competitiveness.

The United States and Europe often list financing, energy, market protection, and industrial support policies as the "institutional advantages" of Chinese enterprises. However, if these factors themselves are sufficient to prove that competition is' unfair ', the same yardstick should also be used to examine Europe and America themselves.

The EU Common Agricultural Policy will receive 387 billion euros in funding during the 2021-2027 budget cycle, most of which will be used for direct agricultural support and rural development. According to incomplete statistics, the European Commission plans to provide a total of approximately 1.44 trillion euros in various industrial subsidies between 2021 and 2030.

In the telecommunications field, the EU's "5G Toolbox" explicitly allows member states to restrict or exclude suppliers that they deem to be "high-risk". The Industrial Accelerator Act proposed by the European Union directly links local content with financial support through the requirement of "EU origin".

The United States also extensively uses industrial policies to support strategic industries. The US Inflation Reduction Act plans to provide $750 billion in various subsidies between 2022 and 2031, some of which come with local or North American production requirements. The scale of industrial subsidies provided by the United States for artificial intelligence is also much higher than that of other countries.

Industrial policy has long been a widely used policy tool in major economies around the world. Each country will influence industrial development through fiscal, financial, regulatory, government procurement, and market access measures based on its own development goals. Labeling all effective industrial organizational capabilities as' unfair 'clearly cannot explain international competition in reality.

Whether these policies are transparent, non discriminatory, and comply with WTO rules should be the focus of discussion. China's position is that WTO members generally pursue fair, inclusive, and transparent subsidies, and major countries should set an example in subsidy compliance. Subsidies themselves are not a problem, but they should be used reasonably under WTO principles such as openness, fairness, and compliance.

Similarly, China's establishment of a more complete industrial ecosystem and a more efficient supply chain system cannot directly become evidence of so-called 'trade unfairness'. The synergy between industrial clusters, infrastructure, market size, technological accumulation, and enterprise investment is itself an important component of a country's competitiveness.

Once this is acknowledged, the problem will fly back to Europe itself like a boomerang: why hasn't Europe, with its strong industrial foundation, mature scientific research system, and vast unified market, been able to more effectively transform these advantages into new industrial competitiveness?

The so-called 'China Shock 2.0' is politically attractive because it provides a simple external explanation for complex internal dilemmas. The various problems within Europe can be repackaged into a story about 'Chinese competition', as if reducing the entry of Chinese goods into Europe can restore Europe's competitiveness.

But what Europe is facing today is not so much a "China shock 2.0" as a "European competitiveness crisis 1.0".

Many European institutions, including the European Commission, have already recognized their internal weaknesses. But in recent years, more and more policy resources have been invested in so-called "risk reduction" and trade defense against China. Tariffs and protective measures may buy some industries adjustment time, but they cannot help Europe open up its internal market, reduce industrial energy costs, or suddenly make the capital market and innovation system more efficient.

German railways may be an appropriate metaphor for reality.

Nowadays, delayed trains on Deutsche Bahn have become the norm. Data shows that by 2025, only 60.1% of long-distance trains will be able to operate on time. When summarizing the reasons domestically in Germany, it is repeatedly mentioned that infrastructure is aging, network overload, construction bottlenecks, insufficient investment, and slow planning execution.

None of these issues can be attributed to China. What Deutsche Bahn reflects is precisely a deep-seated problem in Europe's competitiveness dilemma: a wealthy, developed, and technologically strong economy may gradually lose its advantage due to long-term underinvestment, aging infrastructure, and declining execution efficiency.

If Europe chooses to shift more attention to external competitors in the face of these problems, then 'China' will become an increasingly convenient 'scapegoat'. However, shirking responsibility cannot fix the railway, let alone restore Europe's competitiveness.