European Industry Is in Crosshairs of China’s New Five-Year Plan

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“People in China still say Porsche is a good car, but there’s a BYD that has the same power, is made in China, and costs half as much,” he said. “And they’ll tell you that right to your face.”

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The threat to pillars of export strength is already weighing on prosperity and rendering production capacity obsolete. The impact of China’s renewed focus on manufacturing and trade, as assessed by Goldman Sachs economists, could cost the euro area 0.6% of gross domestic product by the end of 2029, with Germany facing an even bigger drag of 0.9%.

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Pressure points in the near term will be areas of established manufacturing where China plans to deploy new technology, like chemicals, the automotive sector, machinery and electrical engineering. But more futuristic industries cited in the five-year plan — including robotics, quantum technology and 6G communications — also matter. 

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Michael Laha, a senior research fellow at the German Council on Foreign Relations, highlights biomanufacturing — where living cells like bacteria or yeasts are used to make food ingredients, pharmaceuticals and related items — as an area that will “increasingly become a focal point of global geopolitical tensions” and where Europe risks new dependencies. 

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The five-year plan includes a goal of strengthening the social safety net and boosting domestic consumption, which is seen as a major weak spot. Such steps have been a key demand of European officials, as they would reduce the economy’s reliance on exports. 

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Chinese leaders including Premier Li Qiang have also pledged to further open up their market to overseas companies, while denying that state subsidies are behind the rise of manufacturing. The government has launched a campaign to fight excessive competition and overcapacities, though effects have been limited so far. 

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“Demographic pressures of an aging population, together with the Chinese economic model’s reliance on suppressing wage growth, inevitably limit domestic consumption’s weight in the economy,” said Alicia Garcia-Herrero, a senior fellow at the Bruegel think tank, and chief economist for Asia Pacific at Natixis. “Instead, the government plans to sustain high growth by expanding the country’s global market share of exports, especially exports of high-tech goods.”

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Manufacturing in France, the euro zone’s second-biggest economy, is also in the frame. Heavyweights like Airbus SE and Safran SA may face growing pressure from China’s investments in aviation, while Sanofi SA and other drugs companies are under threat as the country commands a growing share of the global market amid a heavy push into innovation. Renault SA is meanwhile launching cheaper EVs to stave off a Chinese offensive in its home market. 

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It’s against that backdrop that President Emmanuel Macron has called China’s trade surplus with the European Union unsustainable, and warned of possible “strong measures” in response. But forging a common front isn’t easy, further complicated by the need to field trade barbs from US President Donald Trump.

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Disagreement has plagued the European Commission’s own proposal, called the Industrial Accelerator Act, which aims to raise the share of European manufacturing in the economy to 20% in 2035 from 14.3% in 2024. Its measures would break from the bloc’s commitment to open trade by favoring some European goods in public procurement. 

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That plan was postponed repeatedly due to internal divisions, as Macron strongly pushed such a “Made in Europe” approach while German Chancellor Friedrich Merz urged a focus on cutting red tape and strengthening the EU single market. 

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Konrad of Hahn Automation Group says the region must become more assertive in supporting the private sector.

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“Without any measures, I really do see technology companies continuing to disappear,” said Konrad, whose industry is likely to be affected by China’s plans. He supports local-content requirements, but acknowledges such rules would cause a “friction” in the economy.