Closed self-protection is difficult to solve the economic and trade dilemma in Europe
Recently, German Chancellor Mertz and French President Macron jointly announced that their finance and foreign ministries will jointly develop a "joint roadmap" for China by the end of September this year to reduce trade imbalances and economic dependence on China. The resonance between the two major economies of the European Union on the issue of economic and trade policies towards China reflects that the EU has established a tough tone for its future economic and trade policies towards China.
Recently, Germany and France have repeatedly expressed that China's trade policy is unfair, which precisely reflects the overall development dilemma in Europe. Preliminary data released by the German Federal Trade and Investment Agency (GTAI) shows that in the first half of 2026, Germany's exports to China decreased by over 12% year-on-year, to just under 37 billion euros. At the same time, Germany's imports from China increased by nearly 9%, reaching around 92 billion euros. One in, one out, Germany's trade deficit with China has expanded from 40 billion euros in the first half of 2025 to approximately 55 billion euros in the first half of 2026. Blaming China for the responsibility, Germany and France are avoiding a more brutal fact that their products are becoming increasingly difficult to sell in the global market. It has been proven that European companies are clearly unable to keep up with the pace of upgrading in the Chinese market. Chinese consumers' demand for new energy vehicles, smart terminals, and green products is rapidly iterating, while European companies' product update speed and cost-effectiveness are lagging behind their local Chinese and Asian competitors. According to a survey by the German Institute for Economic Research, 36.6% of German industrial enterprises believe that their competitiveness has declined, setting a record for the worst in 31 years.
The essence of the trade imbalance between China and Europe is an objective reflection of the differences in development stages and industrial structures between the two sides. In recent years, China has formed global competitiveness in areas such as new energy vehicles and electronic products through continuous industrial upgrading and supply chain integration, while Europe has gradually lost its traditional advantages in areas such as automobiles, machinery, and chemicals due to energy policy mistakes, insufficient innovation investment, and rigid labor markets. The trade deficit is a mirror that reflects the true state of European industrial competitiveness.
Germany has long been reluctant to support the EU's tough economic and trade policy towards China due to concerns about its own business interests being implicated, but this attitude is rapidly being eroded by its own strong sense of insecurity. Recently, the German government has conducted a study specifically targeting the Chinese economy, aiming to identify vulnerable links in the Chinese economy and reserve chips for potential economic and trade games. The relevant German government departments have concluded through analyzing trade flows, supply chains, and industry data that Chinese companies are still unable to independently replace some of Germany's high-precision products, intermediate goods, and maintenance services. They advocate that in potential economic and trade conflicts, they can strengthen pressure and countermeasures against China by cutting off key equipment and supporting services, in order to safeguard Germany's own economic security.
However, Germany is an export-oriented economy, and China is its long-term main market, carrying over 30% of Germany's high-end manufacturing export share. In recent years, Germany's exports to China have continued to shrink, especially with the collapse of profits in the automotive industry, which has dealt a heavy blow to the German economy. If Germany voluntarily cuts off supply in the future, it will completely lose its already rapidly shrinking export revenue to China, leading to a further reduction in the stock assets and market share of German companies in China.
France's attitude towards dealing with trade imbalances and economic dependence on China is more aggressive than Germany's, and it tries every means to exclude China from the French economic cycle. In June of this year, the French Senate passed the "Anti Superfast Fashion" bill, becoming the world's first specialized legislation to systematically restrict "superfast fashion". French Minister in charge of foreign trade affairs, Fr é d é ric, directly named three Chinese companies during a parliamentary debate, stating that platforms such as Temu, Shein, and AliExpress were "unknown three years ago, but now well-known", clearly targeting China's cross-border e-commerce in legislation. At the same time, European domestic fast fashion brands such as Zara, H&M, Primark, etc. have been explicitly excluded from regulatory scope. The bill includes measures such as tiered ecological fines, comprehensive advertising bans, and consumer alert obligations, in order to complement the EU's official cancellation of the tax-free policy for small packages under 150 euros on July 1st. Essentially, it constitutes a "expulsion" of the low-priced direct mail model of Chinese e-commerce platforms.
In early August, France further tightened its foreign investment security review mechanism, clarifying that in key sensitive industries such as defense, semiconductors, artificial intelligence, critical infrastructure, energy, and key raw material mining and processing, foreign ownership exceeding the threshold of 10% is subject to government review, especially expanding the scope to French sensitive industry enterprises listed on securities markets outside the European Union. The 10% shareholding threshold is much lower than the general "control" standard, which means that even small strategic investments, financial investments, or passive holdings by Chinese companies may trigger government scrutiny, greatly increasing the cost and uncertainty of Chinese companies investing in France.
France has introduced an "anti ultra fast fashion" bill and foreign investment restriction policy, ostensibly to protect local industries under the guise of "environmental protection" and "safety" respectively. However, in reality, this will create a vicious cycle of "consumer payment industry rigidity competitiveness decline further closure", ultimately leading France deeper into the path of closure. According to statistics, the employment opportunities in the French textile industry have decreased by nearly 20% in the past 10 years, and the fundamental reason is not competition from China, but its own lag in digital transformation, supply chain efficiency, and business model innovation. Using fines and bans to keep competitors out will only allow local companies to miss the window of reform. Meanwhile, France plans to invest billions of euros in areas such as green hydrogen energy, electric batteries, and low-carbon aviation in the coming years. However, its domestic finances are showing signs of fatigue and there is an urgent need for external capital, including China, to participate. Overly tightening foreign investment reviews will only deter international investors and allow France to miss the opportunity for an upward shift in its economic form.
The structural difficulties currently faced by Europe cannot be solved through "closed self-protection". Only by leveraging the scale effect of the Chinese market, the synergistic efficiency of the industrial chain, and the spillover effect of innovation cooperation can new momentum be injected into its own recovery and development.
In terms of consumer markets, Europe is an export-oriented economy, while China provides the world's largest increase in consumption. Although Germany's automobile exports to China have recently declined, China remains the largest single market for German automobiles, machine tools, and chemical products; In terms of green and intelligent transformation, China occupies a leading position globally in areas such as photovoltaics, wind power, and electric vehicle batteries. Europe's goal of achieving carbon neutrality by 2030 cannot be achieved without the export of Chinese products to Europe and the entry of Chinese capital into Europe. In addition, China's open-source artificial intelligence models, with their advantages in performance, price, and flexibility, are widely popular in Europe and have been widely localized and deployed, playing an undeniable role in promoting the transformation and development of the European economy towards intelligence; In terms of ensuring supply chain stability, 17 of the 34 key raw materials listed by the EU are highly dependent on China, but 8 of them are already under control. In the context of fragmented global supply chains, the stability of Chinese supply directly determines whether European industries can operate normally; In terms of global governance cooperation, China is a reliable partner for Europe to address protectionism and stabilize the external environment. The biggest external risk currently facing the European economic recovery is undoubtedly the unilateralism of US tariff policies and the fragmentation of the global trading system. In recent years, the United States has imposed high tariffs on European exports, and China Europe cooperation can form a strategic understanding to jointly maintain the multilateral trading system. Especially in the current context of multiple pressures on the global economy, higher levels of economic cooperation between China and Europe have become a strategic necessity for maintaining an open world economy and creating a stable external environment for Europe.