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Recent weeks have seen a growing chorus in the West proclaiming the inevitability of a China-EU trade confrontation. The European Commission has lately declared its trade relationship with China as "not sustainable," while commentaries in media such as The Economist have even gone so far as to invoke the Thucydides Trap, arguing that China's expanding economic footprint in Europe makes a "mighty collision" on trade all but unavoidable.

Such arguments certainly make for eye-catching headlines. Yet they overlook a reality far more consequential than political rhetoric: Businesses follow market incentives.

A closer look reveals an interesting disconnect. As measures to tackle so-called overcapacity top the agenda of political gatherings such as the G7 and the upcoming EU summit, European companies continue to expand their footprint in China.

The numbers tell a compelling story. According to a survey by the European Union Chamber of Commerce in China covering nearly 300 members, 68% of respondents said they were either staying or expanding their operations in China. This tendency was further echoed by the Chamber's President Jens Eskelund who highlighted in a recent interview that more than half of European companies see China as a top three investment destination.

If China truly represents the kind of economic "shock" portrayed by certain political voices, European businesses would have been among the first to scale back their presence.

Yet, the opposite is happening. And the reasons are not difficult to understand.

The same survey first points at efficiency: About three-quarters of EU companies in China said their production facilities in the country were more efficient than operations elsewhere. Notably, this advantage is no longer based solely on labor costs, but increasingly on China's advanced industrial infrastructure, sophisticated logistics networks, and rapidly growing automation capabilities.

Over the past decade, China has emerged as the global epicenter of industrial automation, accounting for 54% of all new industrial robot installations worldwide. Meanwhile, breakthroughs in areas such as artificial intelligence (AI) and humanoid robotics are further strengthening China's manufacturing competitiveness. According to Morgan Stanley's projection, China's share of global manufacturing could rise to 16.5% by 2030 as the country builds out capacity across the humanoid robotics supply chain.

For European companies seeking efficiency, scale, and responsiveness, China offers advantages that are difficult to replicate elsewhere. It is therefore unsurprising that many firms regard China as an indispensable market despite mounting geopolitical headwinds.

Second, China's supply-chain ecosystem remains top-notch in its scale and sophistication.

Despite repeated claims by policymakers in Europe to diversify sourcing arrangements, China continues to account for nearly one-third of global manufacturing output, making it a central node in numerous industrial value chains from electronics to machinery.

In this ecosystem, suppliers, manufacturers, logistics providers and research institutions operate within highly integrated industrial clusters that significantly reduce production costs, shorten innovation cycles and improve operational efficiency.For many European small and medium-sized enterprises (SMEs) especially, access to Chinese supply chains is therefore not a vulnerability, but a competitive advantage.

More importantly, far from being one-sided dependency, this deep integration of Chinese and European supply chains is mutually beneficial. European companies gain efficiency, competitiveness and access to one of the world's most dynamic industrial ecosystems, while Chinese manufacturers benefit from investment, advanced expertise and deeper integration into global markets.

Third, China is increasingly serving as a platform for industrial transformation, which is particularly evident in the automotive sector.

As the global industry undergoes a historic shift toward electric and more intelligent vehicles, many European automakers are turning to China not simply as a production base, but as a source of innovation.

Since 2018, the tie-up with Chinese counterparts has become an ever-more important component of European automakers' transformation strategies. Leading brands such as Volkswagen, BMW, Mercedes-Benz, and Stellantis have established technology partnerships with 30 plus Chinese companies and research institutions in fields ranging from batteries and software to vehicle connectivity and smart manufacturing.

The rationale behind such partnerships was succinctly captured by Ralf Brandstatter, chairman and CEO of Volkswagen Group China who described China as "the world's most competitive and innovative automotive market."

To date, Volkswagen has invested about €3.5 billion ($4.1 billion) in Hefei City in east China's Anhui Province, building a complete NEV ecosystem encompassing research and development, manufacturing, and supply chains.

Increasingly, legacy automakers in Europe like Volkswagen are leveraging China as a global export and innovation hub which can help them become more competitive to win back consumers through lower costs and more advanced technology. According to the Rhodium Group, a US consultancy, foreign companies already account for around two-fifths of China's car exports to Europe.

The broader green transition crystallizes such logic of reciprocity.

Climate change, energy security, and sustainable development are shared challenges for both China and Europe. They are also areas where closer cooperation can generate substantial benefits for both sides. China offers manufacturing scale, technological deployment, and cost-effective clean-energy solutions, while Europe possesses a substantial market for green energy consumption.

A case in point is BMW's partnership with a Chinese cycling company to establish a closed-loop recycling system for raw materials from retired power batteries, helping strengthen the green competitiveness of its industrial chain and resilience of energy security.

Collectively, these facts point to a conclusion that some political voices in Europe remain reluctant to acknowledge: China-EU economic ties are fundamentally reciprocal rather than zero-sum.

The scale of these mutual gains is reflected in the numbers. In 2025 alone, trade between China and the EU reached $828.1 billion, with the volume of trade in a single day now equivalent to the total annual trade volume at the beginning of diplomatic relations. Meanwhile, the two-way investment in stock has risen from virtually zero to approximately $280 billion, creating jobs, supporting innovation and driving growth on both sides.

Furthermore, the depth of this economic interdependence means that disruption could carry significant costs. According to the estimate by the China Chamber to the EU, the forced replacement of Chinese suppliers across 18 critical sectors would ​cost the EU €367.8 billion (roughly $431.5 billion).

At a time when global economic recovery remains fragile and protectionist sentiments are rising, Europe faces a choice. It can allow geopolitical anxieties to continue sapping the foundation of one of the world's most important partnerships, or it can recognize the substantial mutual benefits that the pragmatic cooperation with China continues to deliver.

Apparently, more and more European companies are voting for the latter. Far from being destined for confrontation, China and Europe remain capable of building a partnership that creates opportunities on both sides, generates shared prosperity, and contributes to a more stable and open global economy.

The author Liu Mengling is a Beijing-based analyst of political and international relations.

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