The Debate | Diplomacy | Opinion | East Asia

Europe Still Has Leverage Over China

Brussels should use the leverage before it slips away.

Europe’s China debate has long been shaped by the assumption that China’s power would continue to grow almost automatically and that this rise would lead to liberalization. When this did not happen, Europe thought it could get away with adapting and managing risks.

That’s no longer the case.

China is without question a heavyweight. It is an industrial power, a technology innovator and a geopolitical actor. But it is not the unstoppable giant many in Europe still take it to be. Behind the display of strength lie mounting structural pressures: an ageing society, a shrinking workforce, a deep property crisis, weak consumption, high debt and slowing growth. China’s population is becoming more pessimistic, saving rather than spending.

This vulnerability is not good news for Europe. If anything, China’s fragility is reinforcing political control at home and a more assertive posture abroad. Beijing seeks to reduce its own dependencies while deepening those of others.

This has consequences for Europe. China’s weak domestic demand is pushing excess capacity abroad. Massive state backing, including subsidies, allows Chinese firms to pursue aggressive pricing wars, which threatens the competitiveness of non-Chinese manufacturers globally. As Beijing expands its industrial dominance, it creates dependencies on Chinese technology and innovation. This is not just a trade issue but one of power. A Europe dependent on China in key sectors is more vulnerable to political pressure.

And yet this is not only a story of risks. It is also a story about Europe’s room for maneuver. The EU is vulnerable, but so is Beijing. 

China needs Europe more than is often assumed by European policymakers. Access to the European Single Market remains essential for Beijing, especially as the U.S. market becomes more restrictive. Europe is one of the few places where Chinese firms can still sell higher-value goods at attractive profit margins. 

European research, technological excellence, and industrial know-how also remain valuable. This latter leverage is, however, limited and shrinking. Europe should not let it slip away unused.

That is why Europe needs a different China policy.

Full decoupling from China is neither desirable nor achievable. China and the EU will remain interdependent. There is no hope for “change through trade”; economics and security cannot be separated. Instead of hope for systemic change, however, Europe should pursue a more interest-driven and leverage-based strategy.

First, Europe........

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