Over the past five years, China has fueled roughly 30% of global economic growth annually. Its manufacturing colossus has functioned as an anchor for global supply chains, driving down the cost of clean energy technologies and delivering affordable products worldwide.

Yet despite these contributions, a familiar narrative has resurfaced in Europe. Under the label of "China Shock 2.0," some argue that China's rapid advances in electric vehicles (EVs), lithium batteries and solar photovoltaics (PV) – collectively known as the "New Three" – stem from "overcapacity" and state subsidies, posing a threat to Europe's industrial future.

The accusation has become a convenient explanation for Europe's manufacturing anxieties. But it misdiagnoses the problem. The greatest challenge facing Europe is not China's competitiveness, but weakening domestic demand, slowing innovation and structural constraints within some European countries' own economies. Protectionism may be politically attractive, but it cannot restore competitiveness.

Europe's challenge is competitiveness, not China

As Tu Xinquan, dean of the China Institute for WTO Studies at the University of International Business and Economics, argued, the so-called shock is simply the outcome of normal market competition.

The data tell a different story from the political rhetoric. According to Bloomberg, European auto plants operate at an average capacity utilization rate of just 55%, while Stellantis alone has roughly 3.5 million vehicles' worth of idle capacity.

Writing in the Financial Times, European economics commentator Martin Sandbu argued that Europe is confronting a "phantom Chinese threat." The real problem, he wrote, is weak domestic demand rather than Chinese overcapacity. 

Although imports of Chinese-made vehicles have increased, overall vehicle imports into the EU have remained broadly stable. Chinese brands have largely replaced imports from other markets, while Europe's own auto market has continued to shrink. Compared with 2019, Germany sold around 750,000 fewer cars in 2025, and EU vehicle sales declined by about 1.5 million units, he wrote.

As Jian Junbo, deputy director of the Center for European Studies at Fudan University, observed, "In a market economy, only uncompetitive products suffer from overcapacity."

Nor did China's competitiveness emerge overnight. Between 2012 and 2025, China's R&D spending nearly quadrupled to 3.93 trillion yuan (about $565 billion), while the country entered the world's top 10 in the 2025 Global Innovation Index. More than 6,000 AI companies now operate in China, and the country has maintained the world's largest R&D workforce for 13 consecutive years. These are the foundations of competitiveness – not unlimited subsidies.

Protectionism is the wrong answer

Trade barriers may temporarily shield less competitive industries, but they also raise costs and weaken long-term competitiveness.

According to Allianz Trade, around 77% of additional tariff costs are ultimately absorbed by importers and consumers through lower profit margins or higher prices. The EU's decision to remove tariff exemptions for low-value parcels has already prompted consumer groups in Germany to warn that hidden customs and administrative charges could significantly increase the prices of everyday goods.

Even within Europe, concerns are growing. Stefan Scholl, technology editor at Handelsblatt, has argued that punitive tariffs on Chinese EVs protect outdated production capacity rather than future industries. Fair competition, he argues, would encourage European companies to accelerate innovation while securing affordable green technologies essential for the continent's climate goals.

'China Opportunity 2.0,' not 'China Shock 2.0'

While policymakers debate new barriers, global businesses continue to follow market realities. From January to May, China established over 25,000 new foreign-invested enterprises, up 5.3% year on year. Nearly 4,000 foreign companies expanded their operations in China, shifting their strategy from "buying in China" to "innovating in China."

European businesses themselves illustrate this reality. Ralf Brandstaetter, Volkswagen Group's China chief, has said that experience gained in China has helped shorten the company's vehicle development cycle in Europe from 48 months to 30-36 months, strengthening Volkswagen's competitiveness globally.

Far from being a "China Shock 2.0," China's development has increasingly become a "China Opportunity 2.0." By pursuing high-standard opening up, China is making advanced technologies more accessible and enabling more countries to share the dividends of innovation and development.

According to the British energy think tank Ember, China's investment has helped drive down the global cost of solar, wind power, battery storage and electric vehicles. Chinese open-source AI models have surpassed 10 billion cumulative downloads worldwide, while major scientific facilities – from quantum research to the Tiangong Space Station – are increasingly open to international cooperation.

Indian analyst S. L. Kanthan has aptly described this trend not as "China Shock 2.0," but as "China Gift 2.0."

Whether China's development is viewed as a "shock" or an "opportunity" ultimately reflects two competing visions of globalization. One sees another country's success as a threat to be contained; the other recognizes that openness, innovation and cooperation create shared prosperity. At a time when global growth remains fragile, the greater threat to the world economy is not China's development – it is the growing retreat from openness and the rise of protectionism.