European companies double down on China while Brussels builds higher walls

Editor's note: Yang Chengyu is an associate research fellow at the Center for Promotion of Cultural Development of the Chinese Academy of Social Sciences. The article reflects the author's opinions and not necessarily the views of CGTN. It has been translated from Chinese and edited for brevity and clarity.

The latest survey by the European Union Chamber of Commerce in China shows that, for the first time in five years, the proportion of European companies reporting that it has become more difficult to do business in China has declined. At the same time, the share of companies that believe the business environment has improved increased by two percentage points year on year. The data suggest that business confidence among European companies operating in China has reached a turning point. The optimism expressed by the European business community stands in stark contrast to the EU's steadily tightening external policy in recent years, and this systemic disconnect has become the central paradox of current China-EU economic and trade relations.

Against the backdrop of the "China Shock 2.0" narrative, the EU seeks to counter mounting competitive pressure from Chinese industry and systematically plan trade defenses and barriers. In this context, they have focused on Europe's industrial base, its dominance in the green transition, and the reallocation of global manufacturing value chains, driving a paradigm shift in their economic and trade toolkit toward China from "trade defense" to "institutional offense". The EU's toolkit has evolved from traditional anti-dumping and anti-subsidy investigations to a package approach encompassing tariff barriers, market access restrictions, investment screening, regulatory and standards-based barriers, as well as deterrence and countermeasure instruments. The EU is even considering introducing instruments targeting excess capacity or resilience to raise systemic confrontation. At its core, the EU's approach to trade frictions with China is undergoing a qualitative shift, from resolving individual disputes within the WTO's multilateral rules-based framework toward addressing systemic institutional confrontation under unilateralism. In recent years, it has successively proposed or implemented a series of highly targeted trade policy instruments, including the Carbon Border Adjustment Mechanism, the International Procurement Instrument, the Foreign Subsidies Regulation, the Anti-Coercion Instrument, the Corporate Sustainability Due Diligence Directive, the Industrial Accelerator Act, and the revised Cybersecurity Act.

Businesses, however, see the situation quite differently. Since last year, exchanges between Chinese and European business communities have become increasingly frequent, with cooperation deepening and expanding across a broader range of areas. According to China's customs statistics, the country's total trade with the EU reached 5.93 trillion yuan ($872.8 billion) in 2025, up 6% year on year, accounting for 13% of its overall foreign trade and contributing 0.8 percentage points to the growth of China's overall imports and exports. EU data show that, during the first 10 months of 2025, total EU-China trade exceeded $700 billion, representing 14.5% of the EU's total external trade and driving the growth of the EU's overall imports and exports by more than 0.8 percentage points. By May this year, the cumulative number of China Railway Express freight services had exceeded 130,000, making the network a vital supply chain corridor connecting trade across the Eurasian continent. These figures clearly demonstrate that China-EU economic and trade cooperation is fundamentally complementary and mutually beneficial, with strong resilience in the face of external disruptions.

At the same time, China and Europe have become deeply integrated through their industrial and supply chains, and European companies' growing investment in China has shifted from a traditional market-driven strategy toward one centered on R&D and innovation. Rather than "decoupling" in response to Brussels' trade barriers, many European companies are choosing to develop and commercialize cutting-edge technologies first in the Chinese market. Through deeper localization, they are making China a core hub within their global R&D and supply chain networks.

In fact, the stability of China-EU relations rests on shared interests, while their predictability derives from mutual benefit and win-win cooperation. The EU's economic policymaking has been shaped increasingly by geopolitical considerations and industrial protectionism, using the framework of "de-risking" to securitize and politicize economic and trade relations. Meanwhile, European companies have based their investment decisions on expected returns, supply chain efficiency, and market size. China's comprehensive industrial ecosystem and its mega-market constitute an irreplaceable systemic draw for European businesses. As a result, European companies often "vote with their feet", responding flexibly through their actual actions. This divergence reveals a profound disconnect between the policymaking and business realities in China-EU economic and trade relations, while also indicating that unilateral protectionism will ultimately face an even stronger pushback from market forces.