Europe-China Between Competition and Cooperation

This work is a collaboration between IMT-Iddri and Do Well Do Good in the context of the current discussion and Strategic Dialogue at the European level around the review of industrial policy applied to key sectors, as well as its trade and industrial cooperation with China in particular. It examines the evolving industrial relations between Europe and China in the automotive sector, with particular attention to how market dynamics have been reshaped over the past decade.

This analysis is grounded in empirical observation: it systematically tracks market shares, production capacities, plant footprints, and the strategic trajectories of European and Chinese firms operating across both geographies. Objectivizing these dynamics is especially relevant considering that the automotive industry is the European Union’s largest manufacturing sector, employing 12.7 million people and contributing to 7% of GDP (ACEA, 2024). The paper thus proposes a three-step analytical framework. First, the focus extends beyond the automotive sector to examine developments in China across a range of industries – including tele-communications, retail, household appliances, and business-to-business services – to distill common structural patterns of industrial competition and market reconfiguration. Second, these insights are applied to the trajectory of China’s automotive industry, emphasizing the rise of Chinese original equipment manufacturers (OEMs) and their competitive strategies, particularly in electric vehicles and batteries. Then, the analysis is mirrored to reflect the situation in Europe. Overall, it describes the shift of China from being primarily a growth market to becoming a direct competitor. Against this backdrop, the study concludes by outlining a non-exhaustive set of policy and strategic options available to the European Union. These options are conceived as combinable and sequenced measures designed both to safeguard the European market and to reinforce domestic industrial capabilities, thereby anchoring value creation within the Union.