Jens Eskelund, head of the European Union Chamber of Commerce in China and managing director of Maersk’s Chinese operations, warns that European manufacturers could abandon attempts to compete with their Chinese counterparts by the end of the decade if current trends continue. Speaking in Brussels during back-to-back meetings with European Commission officials, he described the situation as an existential crossroads where companies ask, "What is the point of trading?" A Goldman Sachs report forecasted that Chinese exports would lower the EU’s gross domestic product by 0.5% by the end of the decade while reducing Germany’s by up to 0.9%. This projection raises a fundamental question: if trade delivers negative value to one party, why maintain it? Eskelund pointed to a potential doomsday scenario involving mass job losses, a collapse in the tax base, and spiralling social benefits costs. The threat is already biting in Europe’s car, chemicals, and renewable energy sectors. BMW reported a 22% drop in sales in China for the first nine months of the year and issued a second profit warning this year.
The supply chain pivot
European firms are shifting from serving the local market to becoming part of global Chinese supply chains. Eskelund noted that many companies now operate under a philosophy of "Made in China for the world" rather than just for the domestic market. This evolution allows them to compete on a global marketplace despite brutal competition within China itself. He observed that in almost all industrial verticals, there is at least one, and probably several, Chinese competitors. The currency is undervalued by about 30%, which leaves Europeans in the dust. For many members, this strategy has led to an uptick in confidence over the past year. Faced with a saturated market in China, they begin to explore exports through joint domestic partnerships. This approach enables them to leverage Chinese supply chains to remain competitive globally. It is a significant shift from the old days when companies came to China solely to service the local market.
Strategic misalignment
Eskelund rejected the term "China shock 2.0," arguing that Beijing’s plans to displace imports were the enduring theme of the last three five-year plans since the Made in China strategy was agreed in 2015. A recent report by the Centre for European Reform urged Germany to stop admiring Beijing and change its strategy. China’s latest five-year plan for 2026 to 2030 doubles down on self-reliance, targeting AI, quantum computing, robotics, smart and green tech, biomanufacturing, brain-computer interfaces, and 6G communications. Solar panels, wind turbines, robots, driverless cars, and advanced chips are central to this new strategy for global domination. Once a strategy is decided in Beijing, incentives, tax breaks, and subsidies flow down to town and village levels. Officials across the country know exactly what to focus on and do. Eskelund advised EU leaders to engage with China to ensure value creation for both sides. He criticized the view that trade imbalances can be addressed by increasing exports, calling it fantasy given that this year’s surplus against the rest of the world is expected to surpass 2025’s record $1.2tn. China has always been very focused on outcomes, whereas Europe has been more focused on principles. This difference raises the question of whether following principles is delivering undesirable outcomes.
