European manufacturers could face an existential crisis by the end of this decade as China’s growing industrial dominance and expanding exports intensify pressure on businesses across the continent, the head of the European Union Chamber of Commerce in China has warned.
Jens Eskelund, president of the Beijing-based European Union Chamber of Commerce in China, said European companies might eventually have to reconsider their traditional approach towards competing with Chinese manufacturers and instead explore opportunities to become part of China’s extensive supply chains.
He cautioned that if the current trend continued, European businesses could increasingly find it difficult to remain competitive in several industrial sectors, raising concerns over factory closures, large-scale job losses and the long-term weakening of Europe’s manufacturing base.
Eskelund said European manufacturers could reach a point where they begin questioning the economic benefits of continuing trade with China, particularly if the growing imbalance results in substantial advantages for Chinese businesses while weakening industries in Europe.
His remarks come amid mounting tensions between the European Union and China over trade imbalances, industrial competition and market access. The European trade deficit with China has reached unprecedented levels, estimated at around €1.18 billion a day, strengthening calls in Brussels, Berlin and Paris for greater protection of domestic industries.
Citing a Goldman Sachs report, Eskelund pointed out that increasing Chinese exports could reduce the European Union’s gross domestic product by 0.5 per cent by the end of the decade. Germany, Europe’s largest industrial economy, could face an economic impact of up to 0.9 per cent, according to the report.
He warned that the consequences could extend well beyond individual companies and affect entire communities dependent on manufacturing. A decline in industrial activity could lead to widespread unemployment, shrinking tax revenues, higher social welfare expenditure and unemployment continuing across generations.
The impact of Chinese competition is already becoming visible in sectors such as automobiles, chemicals and renewable energy. Germany’s automobile industry, in particular, is facing pressure from falling profitability in the Chinese market as well as competition from Chinese manufacturers in its domestic market.
Companies such as BYD, Geely and SAIC Motor have strengthened their presence in the global automobile industry, challenging established European manufacturers. German luxury carmaker BMW recently reported a 22 per cent decline in sales in China during the first nine months of the year and issued its second profit warning of 2026.
Eskelund said China’s industrial expansion should not have come as a surprise to European policymakers and manufacturers. Beijing has consistently pursued a strategy of reducing dependence on foreign imports and strengthening domestic production through successive five-year plans, particularly since the launch of its Made in China strategy in 2015.
China’s latest five-year plan for 2026-30 places considerable emphasis on self-reliance and developing advanced technologies. Key areas include artificial intelligence, quantum computing, robotics, smart and green technologies, biomanufacturing, brain-computer interfaces and next-generation 6G communications.
The strategy is expected to further strengthen China’s position in manufacturing products such as solar panels, wind turbines, advanced semiconductors, robots and autonomous vehicles. Eskelund said European industries needed to prepare for this competition rather than underestimate the speed and scale of China’s industrial progress.
He pointed out that China’s ability to translate national priorities into action through coordinated policies, financial incentives, tax benefits and subsidies at regional and local levels had helped its manufacturers expand rapidly.
However, Eskelund believes withdrawing from trade with China would not be a practical solution for European businesses. Instead, he suggested that European companies explore partnerships with Chinese manufacturers and integrate themselves into their supply chains to remain competitive internationally.
He said several European businesses were already moving beyond the traditional approach of manufacturing products in China exclusively for Chinese consumers. The emerging strategy was increasingly focused on manufacturing in China for international markets.
Under this approach, European companies could establish joint ventures, collaborate with domestic manufacturers and use China’s extensive industrial networks to access global markets. Although the Chinese market itself has become increasingly competitive and saturated, such partnerships could offer European businesses opportunities to expand exports.
He also urged European leaders to engage with Beijing and work towards a trade relationship that generates economic benefits for both sides. He said Europe’s approach, traditionally guided by principles and policy considerations, needed to be assessed against actual economic outcomes.
According to him, European policymakers must recognise the changing global manufacturing landscape and develop a more practical strategy to protect their industrial interests while maintaining international trade relations.
The warning highlights the growing challenge facing European economies as China strengthens its position in advanced manufacturing and global supply chains, potentially reshaping the balance of industrial power over the next decade.
