Taha Jabbar
China is the EU’s largest trading partner, surpassing the US in 2021, accounting for approximately 9% of EU exports and 21% of EU goods imports. Earlier, Europe was the centre of high-end manufacturing and services, and China was the low-wage manufacturer. Things have now changed, as China advances, it increasingly competes with European manufacturing and green sectors, which are cornerstones of Europe’s prosperity in the future.
The EU’s relationship with China has changed from pragmatic economic interdependence to structural strategic vulnerability, which forces Europe to pursue a de-risking strategy- not as a move towards isolationism, but to recalibrate and protect critical industries, protect itself from economic coerciveness, and to protect its long-term economic sovereignty without damaging its internal unity and global competitiveness.
Since 2010, China has been focusing more on emerging strategic industries such as AI, advanced semiconductors, telecommunication, biotech, critical materials, Quantum technology, and new energy technologies. A turning point was when China introduced its “Made in China 2025” strategy, which aimed to build self-reliance in technology, dominate high-value supply chains, and lead the future industries globally.
The measures China took towards this end goal resulted in overcapacity, state-backed price competition, and distortion of global markets. Post-2020, China pursued a dual circulation strategy, which aimed to bolster domestic production and reduce dependence on foreign technology, while at the same time expanding its high-tech exports globally.
This reduced the Chinese dependence on foreign nations overall while making them increasingly dependent on China, putting weaker states at a strategically vulnerable position. Moreover, the economic policy of China is shaped through national security logic and integrates its industrial development with military advancement, which blurs the line between commercial and strategic sectors.
China signalled its ability to coerce economically when it disrupted the rare earth exports to Japan due to a diplomatic crisis. At the time, China controlled nearly 97% of total rare earth production globally. Such behaviour of informal boycotts and disrupting trade is also witnessed with smaller states such as South Korea, the Philippines, Australia, and Taiwan.
Europe got a taste of this when salmon exports from Norway were disrupted after the Nobel Prize was awarded to Liu Xiaobo, a writer and pro-democracy reformist who called for political reforms in China. Amid political tensions with Sweden, graphite imports were reportedly disrupted, and Lithuanian imports were halted after it established a Taiwan representative office. Europe’s strategic anxiety was further increased by Chinese export controls in 2023.
Europe remains heavily dependent on China for rare earth processing; even if minerals are extracted elsewhere, they are still processed in China, as it dominates the upstream supply chain. China dominates the lithium-ion battery cell production, which is the central component for the European EV industry. While Europe is comparatively advanced in advanced chip manufacturing, it still needs Chinese and Asian inputs.
Huawei dominates the 5G infrastructure in EU member states with exposure exceeding 50% in some countries. This highlights how heavily Europe depends upon China for its technological needs and supply chains, making it vulnerable to possible Chinese economic coercion, as happened with Russia after the Ukrainian invasion.
Responding to this, Ursula von der Leyen, president of the European Commission, proposed a de-risking approach. It differs from the US-style decoupling approach, which allows the EU to maintain trade with China while reducing critical dependencies. In the 2023 Economic Security Framework, four risk categories are identified: Supply chain resilience, Critical infrastructure security, Technology Security, Leakage, and Economic Coercion.
To counter, a three-pillar strategy of promote, propose, and partner was introduced. Promote aimed to bolster local extraction and processing of raw materials while setting a benchmark of no more than 65% reliance on any third-country supplier. Protect is aimed at investment screening, export controls, research security, and the establishment of the Anti-Coercion instrument.
Partner aimed to diversify European trade options by establishing a relationship with the third world via Global Gateway, or to strengthen existing relations with the US, after establishing the EU–US Trade and Technology Council. For Europe, self-sufficiency is unrealistic, so it aims at decreasing dependency on any single state while continuing trade according to principles of the Liberal International Order.
Building on structural and strategic considerations, de-risking efforts are constrained by political realities of the Union and member states. The Council has not formally endorsed the Economic Security Strategy, which highlights divisions regarding how far the EU can centralise economic power.
Inbound investment screening is deemed insufficient, and the research security framework lacks proper coordination among member states. National approaches are also different, with Germany broadly supporting the de-risking but emphasising company-level discretion and large firms expanding their operations in China, highlighting the tension between strategic goals and economic incentives. On the other hand, France implements protectionist policies and limits Chinese presence in telecoms and EV subsidies, but resists submitting authority to Brussels. This fragmentation represents the challenges towards effective implementation of the de-risking strategy, leaving Europe vulnerable in critical sectors.
Europe has recognised the risks that dependency on China poses and has derived strategies to mitigate them, but the interplay of national priorities, regulatory gaps, and uneven commitment highlights that implementing these strategies remains a politically negotiated process, constrained by member states’ economic interests and different visions of strategic autonomy. Europe’s future towards strategic autonomy depends upon reconciling these competing domestic and collective priorities.
The author is a scholar of International Relations at the National Defence University, Islamabad, with focus on security, geopolitics, and conflict studies. Passionate about analysing regional dynamics and strategic affairs, he writes op-eds and explore traditional and non-traditional security challenges. His work bridges academic insight with policy relevance, aiming to inform readers about the complex interplay of threats shaping region dynamics.
