No. 149

How Europe is responding to China’s eight-pillar strategy

Following a recent Franco-German Council of Ministers, President Emmanuel Macron and Chancellor Friedrich Merz converged on a firmer stance toward the economic risks posed by China. They highlighted an annual EU trade deficit of roughly 300 billion euros—nearly a billion a day—and called for fuller use of EU instruments alongside a revaluation of the renminbi. While technology transfers and industrial revival in Europe remain goals, the question is whether current tools can rebalance trade and restore competitiveness. A major policy analysis argues that China’s playbook rests on eight pillars—and that Europe needs eight equally robust responses.

The analysis notes that China now dominates critical clean-tech and automation segments: it controls more than 95% of solar wafer production, accounts for over 60% of new wind installations, is the largest market for and exporter of electric vehicles, and deploys more industrial robots annually than the rest of the world combined. With a fast-ageing population and fewer workers, Beijing is shifting toward growth driven by breakthrough technologies. Authorities have launched over a hundred strategic projects in areas like artificial intelligence, biotech, quantum technologies and new materials. An “AI+” push aims to automate a large share of service-sector tasks by 2027–2030, projecting millions of maintenance and digital roles even as routine service jobs are reduced or transformed.

What makes this strategy distinctive is its vertical integration. The goal is not merely to boost a few priority sectors, but to secure entire value chains: from resource extraction and refining to basic research, talent, manufacturing, standard-setting and global sales. China is willing to invest even in low-margin areas if they enhance economic security, industrial resilience or future leverage. In short, it seeks to cut its own dependencies while increasing the world’s reliance on Chinese inputs and technologies.

China’s eight pillars can be summarized as follows:

• Critical resources: control over key minerals, rare earths and strategic metals, plus dominance in refining with market shares exceeding 90% in several steps of processing.
• Infrastructure: heavy investment under the latest plan in energy, logistics, digital and industrial infrastructure to support high-tech sectors and production resilience.
• Human capital: accelerated STEM training, stronger engineering schools, and incentives to retain or attract globally trained talent; visible gains in fields like AI.
• R&D leadership: clear lead across a majority of critical technologies tracked in recent years.
• State support: a web of subsidies and indirect advantages via real estate, energy, credit, taxation, public procurement and coordination across public and private actors.
• Dual circulation: a protected domestic base for scale and learning, paired with assertive export strategies that offload overcapacity in sectors like EVs, batteries and solar.
• Standard-setting: a concerted effort to shape technical norms at home and abroad.
• Coercive leverage: the ability to weaponise dependencies by restricting critical inputs or components.

The EU has begun to act, but responses remain partial or slow. On raw materials and refining, the Critical Raw Materials Act set 2030 goals of 10% domestic extraction, 25% recycling, 40% processing, and a 65% cap on reliance on any single third country per material. Yet progress has been limited, with permitting, capital mobilisation and local acceptance for mining and recycling projects proving difficult—while China’s timelines are already operational.

On industry, the Industrial Accelerator Act (March 2026) targets lifting manufacturing to 20% of EU GDP by 2035, streamlining permits and trimming strategic dependencies. It is a step toward coherent industrial planning, but real-world acceleration is still lagging compared to China’s execution speed.

On skills and talent, Europe has launched initiatives such as the Union of Skills, a STEM Education Strategic Plan, a forthcoming European engineering diploma and the EU Talent Pool. However, education remains a national prerogative, producing fragmented incentives and continued brain drain in key technologies.

Research tools like Horizon Europe give the continent strong basic science, yet Europe struggles to commercialise breakthroughs and scale them industrially. Administrative complexity slows innovation, while rivals move faster from patents to market dominance.

In emerging sectors, Europe has rolled out Important Projects of Common European Interest (hydrogen, batteries, health), the Net-Zero Industry Act, the Chips Act and a platform for strategic technologies. But some instruments largely repackage existing funds without fresh financing. Relaxed national state-aid rules, in the absence of a sizable shared sovereignty fund, risk fragmenting the single market and structurally favouring wealthier member states—still no match for centralised, large-scale subsidies elsewhere.

Trade defence is where the EU shows the most unity. Europe is increasingly deploying tariffs, anti-subsidy and safeguard investigations, and a dedicated tool against subsidised overcapacity to shield its industrial base from underpriced imports in sectors like EVs and solar.

Europe has also adopted a de-risking doctrine, anti-coercion instruments and FDI screening. Yet many measures require lengthy procedures and, at times, unanimity, diluting their deterrent power. Beijing often assumes that intra-European divisions will blunt any unified response—and tailors its approach accordingly.

Bottom line: Europe must adapt to China’s rise without mimicking it wholesale. That means investing at scale in upstream resources and processing, accelerating infrastructure and permitting, aligning education with industrial goals, cutting red tape on innovation, pooling funding where it counts, and staying unified on trade defence and economic security. The rules of the game are shifting; Europe needs a strategy that matches the breadth, speed and integration of the challenge.

Mario Draghi: Hope is not a Strategy

A recent biography offers a portrait of Mario Draghi that goes beyond his roles at the Bank of Italy, the European Central Bank and Italy’s government. Alongside meticulously documented decisions and results, it sketches the person behind the policymaker—his tastes, love of art and museums, even glimpses of everyday life in Rome.

The book explores how cultural conventions shape our view of the world—asking, for example, why children so often colour the sky blue. It traces that instinct back to Renaissance patronage, when costly pigments like gold and lapis lazuli signalled prestige, reshaping artistic norms and the hues we still take for granted.

“Hope is not a strategy” is a Draghi hallmark, yet the portrait that emerges blends pragmatism with vision. Throughout crises from the eurozone turmoil to the pandemic, he combined intuition with execution. The core message for today’s Europe is clear: respond to geopolitical pressure and protectionism with a common strategy, not piecemeal fixes. Pragmatism, courage and determination should outweigh short-term electoral calculus. Europe must move decisively to raise competitiveness—as urged in his 2024 report to the Commission—lest it face a slow decline.