EU-China Economic Relations and Global Imbalances

In the past two decades, China has become the global industrial superpower. Roughly one third of global manufacturing value added is concentrated in China, compared with 15% in the EU. In 2024, the manufacturing sector accounted for 25% of GDP in China, substantially more than in comparable large economies 1 . Chinese export shares in key markets and sectors have grown rapidly, including in traditional strongholds of European industry (Jean, 2024). Other than EVs and batteries, China now dominates green technologies in terms of production capacity and increasingly technological sophistication (IEA 2024, Gerarden et al. 2025). It has also taken over from Germany as the world market leader in machinery, and is the world's largest car exporter. At the same time, China is widely seen as having gained technological advantages over Europe in key future sectors such as robotics and artificial intelligence. The number of European firms that locate their R&D activities to China is rising.In this note, we (1) discuss the drivers of Chinese success in manufacturing and the role of Non-Market Practices and Policies (NMPP); 2 (2) analyse the impact on the French and German economies and the link to global imbalances; and (3) sketch policies to deal with China, including responses to China's raw material policies.1 According to the World Bank, the contribution of the manufacturing sector to aggregate GDP is equal to 14% in the EU, and 10% in the US. The Chinese ratio is also high compared to other large emerging economies, around 13% in BRICS economies. 2 Throughout the note, we will use the term "Non-Market Practices and Policies" to designate any trade-distorting policy that gives "unfair" competitive advantage to Chinese producers in international markets. While this term is arguably vague, it includes trade-distorting subsidies opening the right for anti-dumping and countervailing duties under the WTO. See also the broader definition provided by the US Trade Representative. Given the unclear outlines of the concept, it is not possible to systematically quantify the contribution of Non-Market Practices and Policies to the rapid expansion of China in world manufacturing production.