Over the past five years, China has fueled roughly 30% of global economic growth annually. Its manufacturing colossus has functioned as an anchor for global supply chains, driving down the cost of clean energy technologies and delivering affordable products worldwide.
Yet despite these contributions, a familiar narrative has resurfaced in Europe. Under the label of "China Shock 2.0," some argue that China's rapid advances in electric vehicles (EVs), lithium batteries and solar photovoltaics (PV) – collectively known as the "New Three" – stem from "overcapacity" and state subsidies, posing a threat to Europe's industrial future.
The accusation has become a convenient explanation for Europe's manufacturing anxieties. But it misdiagnoses the problem. The greatest challenge facing Europe is not China's competitiveness, but weakening domestic demand, slowing innovation and structural constraints within some European countries' own economies. Protectionism may be politically attractive, but it cannot restore competitiveness.