Europe's manufacturers could give up competing with China by 2030

European manufacturers could give up trying to compete with their Chinese counterparts by the end of the decade if current trends continue, the head of the European Union Chamber of Commerce in China, Jens Eskelund, has warned. He also fears mass job losses as a result.

In a case of 'if you can't beat them, join them', Eskelund said European companies operating in China were now thinking that the philosophy of 'Made in China for China' could be replaced by one of 'Made in China for the world'.

The head of the influential Beijing-based body said European manufacturers could find themselves at an existential crossroads by the end of the decade, asking themselves: 'What is the point of trading?'

Europe's deficit with China has reached a record level, running at £1bn (€1.18bn) a day, and the mood for protectionism is growing in Brussels, Berlin and Paris. In this situation, Eskelund said European countries might need to shift their policies to allow domestic manufacturers to become part of Chinese firms' supply chains, rather than treat them as competitors.

Eskelund, who is also a managing director of shipping group Maersk's Chinese operations, pointed to a report by Goldman Sachs. The report forecast that Chinese exports would lower the EU's gross domestic product by 0.5% by the end of the decade, and Germany's by up to 0.9%.

'It raises the question, if China's trade delivers negative value, why trade?' the Danish businessman said.

'If you are suddenly in a situation where trade creates a lot of value for one party, but it destroys value for the other, countries will begin to ask themselves, why do we trade?'

He spoke of a doomsday scenario in which manufacturing disappeared from European countries, causing mass job losses, a collapse in the tax base and potential multigenerational unemployment and spiralling social benefits costs.

Speaking in Brussels, Eskelund said he has been in back-to-back meetings with European Commission officials to give them feedback from Beijing. He said Europe is at an inflection point.

'If we create new dependencies, ultimately that might result in Europe losing its ability to determine its own future,' he said, adding that this carries the risk of mass job losses and fraying communities.

That existential threat is already beginning to bite in Europe's car, chemicals and renewable energy sectors. The German automotive industry has been hit by a double blow: reduced profits in China and cheap competition at home from Chinese companies such as BYD, Geely and SAIC Motor. Last week, BMW said its sales in China had dropped 22% in the first nine months of the year, while issuing its second profit warning this year.

Eskelund is not a fan of the term 'China shock 2.0', which refers to the impact of the huge rise in exports of cars, chemicals and components to the EU in the last five years. He said it should not have come as a surprise, because Beijing's plans to displace imports were the enduring theme of the last three five-year plans since the Made in China strategy was agreed in 2015.

'I don't really like the term China shock 2.0 because these things that are happening should not be a shock because it is all written in their five-year plans so you should be able to anticipate that,' Eskelund said.

He said: 'The proof of concept here is that China has been laser-focused on reducing its own dependencies over the last 30 years,' adding that imports had fallen at the same time.

A recent report by the Centre for European Reform (CER) urged Germany to stop 'admiring' Beijing and change its strategy. The report said China's latest five-year plan (2026 to 2030) is a doubling-down on 'self-reliance'.

The report said: 'It is committed to displacing imports in the few sectors where it still depends on foreign supply.' The sectors identified in China's latest five-year plan are AI, quantum computing, robotics, smart and green tech, biomanufacturing, brain-computer interfaces and 6G communications.

Solar panels, wind turbines, robots, driverless cars and advanced chips are part of China's new strategy for global domination.

Eskelund's advice to Europe's industries is not to hide but to brace themselves for China to deliver. Once a strategy is decided in Beijing, incentives, tax breaks and subsidies flow down by region to town and village levels. Officials across the country know what to focus on and do, he said.

His advice to EU leaders: 'Engage with China and discuss getting to a point where everyone can see value is being created for both sides.' He thinks Beijing understands this.

Eskelund said a fundamental shift in approach was needed in Europe. 'China has always been very focused on outcomes, whereas Europe has been more focused on principles. It raises the question of whether following principles is delivering undesirable outcomes,' he said.

In some quarters, including the UK, there is a view that the trade imbalance could be addressed by increasing exports. Eskelund called that just 'fantasy'. This year's surplus against the rest of the world is expected to surpass 2025's record $1.2tn (£900bn).

Eskelund said many companies were still making good money in China, but the brutal competition in the country's supply chains, combined with a currency undervalued by about 30%, left Europeans in the dust.

'What we see right now is that in almost all industrial verticals, almost anywhere in the world, you would have one and probably several Chinese competitors,' he said. 'It's just very, very difficult in most industries to compete with the Chinese.'

Giving up on trade is not the answer. If you can't beat them, join them. And that is what is now happening, the chamber has found.