CBS researcher: “The EU will be caught between the US and China – and unless we take drastic action, it will come at the expense of our welfare”

China is becoming an increasingly bigger competitor for the EU. At the same time, the United States are implementing industrial policies with massive investments in the energy sector. So where does that leave Europe? How should the EU navigate its relationship with China while maintaining a competitive edge? When should we collaborate, and when should we exercise caution? 

These are some of the key questions the research project ‘Dealing with a Resurgent China’ seeks to answer. The project is advising the European Commission on the relationship with China and aims to build a European expert network on China-related issues. 

“We need industrial policies similar to those in the United States and China,” says Kjeld Erik Brødsgaard, Professor at the Department of International Economics, Government and Business and principal investigator of the three-year EU Horizon project.

“If we do not take drastic measures to upgrade European industry, it will impact our welfare and, in the worst case, our independence,” he warns.  

An inevitable and essential partner

Around 500 Danish companies operate in China with investments of DKK 50-60 billion, which makes China one of Denmark’s most significant trading partners. 

China is the largest trading partner for 132 of the 196 UN member states and is deeply integrated into the global economy. By comparison, the United States holds that position for about 52 countries.

This rivalry is fundamentally different from that of the Cold War era when the Soviet Union remained largely detached from the global economy.
Today, China’s economy is characterised by state control and the market liberalisation is largely on hold. While there are far more private enterprises than in the past, state-owned enterprises still dominate the Chinese economy. 

According to Brødsgaard, this reflects China’s ideology of a centralised one-party model that governs both state and private sectors. This approach has drawn political criticism in the West and poses challenges for collaboration. 

China’s charm offensive in a divided Europe

Despite these challenges, China is actively seeking closer ties with Europe. 

“China has launched a charm offensive towards Europe, offering visa-free entry to several countries and sending numerous delegations, also to Denmark,” says Kjeld Erik Brødsgaard. 

However, Europe remains hesitant, unsure of its position and how independently it can act from the United States.

Greater unity within the EU would strengthen its position, but this is difficult to achieve as individual member states, such as Hungary and Slovakia, have their own position towards China. Many Eastern European countries are also engaged in China’s Belt and Road Initiative and participate in the 14+1 cooperation forum, which facilitates regular meetings between China and selected Eastern European nations.

Brødsgaard attributes these divisions to differing national analyses of China and argues that the EU would benefit from aligning these analyses and developing a common strategy for addressing its challenges.

China’s dominance in green energy

The EU is under pressure from China’s highly competitive industry, particularly in green energy.

 “Take Vestas, for instance. Twenty years ago, much of its business and market were in China. Now, they have almost no presence there and are being overtaken by Chinese competitors,” Kjeld Erik Brødsgaard explains. 

China has long prioritised green technologies such as wind turbines, solar panels, batteries and electric vehicles. This has led Chinese companies to the forefront of technological innovation, enabling them to offer advanced products such as solar cells and wind power at low prices. 

This presents a dilemma for Europe. On the one hand, adopting Chinese technology would accelerate the green transition. On the other, it would erode Europe’s own industrial base in these sectors, increasing dependence on China. 

They see the divisions and lack of leadership in Europe and use it to their advantage

Kjeld Erik Brødsgaard, researcher

To remain competitive, the EU must make some strategic decisions, though reaching consensus is proving difficult. 

In a report from 2024, economist and former ECB president Mario Draghi proposed annual investments of at least USD 800 billion. However, securing agreement on financing and coordination remains a challenge – and China is benefiting from Europe’s hesitation. 

“They see the divisions and lack of leadership in Europe, where the French-German engine is failing, and use it to their advantage,” Kjeld Erik Brødsgaard explains.

The race for the semiconductor technology

At the same time, China is shifting its focus from heavy industries like steel, chemicals and cement to high-tech sectors.

 “China’s leadership understands that its main challenge from the West, especially the US, lies in technology, science and semiconductor microchips. That is why they are prioritising these areas,” Brødsgaard explains.  

During his presidency, Joe Biden tightened semiconductor export restrictions to China. As a response, China is investing heavily in developing its own semiconductor industry. It is a difficult task but necessary if China hopes to achieve its long-term goal of becoming a strong socialist nation by 2049.

Ironically, USA’s pressure may end up strengthening China’s capacity in this sector. Already, numerous promising Chinese startups are emerging in areas such as artificial intelligence and tech.

Mixed views on Trump

With Donald Trump returning to the White House, it is difficult to predict how US-China relations will evolve in the coming years.

It is unclear whether China prefers Trump or not.  Some circles are impressed by him, believing they can negotiate with him. His recent statements on Taiwan have likely been well received by China’s leadership, as they suggest he may have a different position on Taiwan than Biden and is unclear about whether the US would help Taiwan in case China attempts to annex the island. 

Trump also has close ties to Elon Musk, who maintains strong connections with China’s top leadership and operates a major Tesla factory in Shanghai, which accounts for nearly half of the global Tesla production.

On the other hand, Trump’s threats of high tariffs could squeeze China’s economy. His appointment of Marco Rubio as Secretary of State has also caused concern in China. 

However, China’s leadership was likely more wary of the Biden administration and its consistent curb of China’s influence than it would be with the new Trump administration.

We can forget about China becoming like us. It is not going to happen

Kjeld Erik Brødsgaard, researcher

The question is how Denmark can navigate a more multipolar world order with an increasingly influential China.

“We can forget about China becoming like us. It is not going to happen,” says Kjeld Erik Brødsgaard.

A need for a global perspective

So, we need to make a fundamental choice as to how we will interact with a divergent China.

“Our politicians must take a more analysis-based approach. They need to implement measures based on real knowledge and expertise rather than simply following political trends and media coverage,” Kjeld Erik Brødsgaard says. 

“We view the world through an American lens, and critical nuances of Chinese politics and economics are often lost in a Danish context. If our politicians are to base their decisions on the Danish media coverage of China, they will be poorly informed,” he says and concludes:  

“We simply cannot afford to remain focused in only one direction. The world is not structured this way anymore. The Global South is gaining influence, while Europe is becoming increasingly isolated internationally. We need a broader global outlook that reflects the reality we live in.”

Read more, listen to podcasts and learn more about EU-China relations at Dealing with a Resurgent China

 

Contact:

Anders Nørland, an.slk@cbs.dk

Kjeld Erik Brødsgaard, keb.ebg@cbs.dk