The case we make

Europe benefited from China’s growth, but underestimated the strategic cost of some of its choices. Consumers paid less, companies expanded margins and governments received capital. Meanwhile, certain supply chains became so concentrated that replacing a supplier, rebuilding expertise or resisting a political demand can now require years and substantial investment.

Our criticism of European strategic naïveté concerns that gap between immediate benefits and accumulated vulnerability. Trade openness could be a sound decision. Assuming it removed the need for an economic security policy was a mistake. The purchase price is visible today. The cost of having no alternative emerges when the relationship stops working.

This study examines trade with China, Chinese shareholdings in Portuguese energy infrastructure, solar manufacturing, German cars and pressure on textiles. It also considers Beijing’s relationship with Russia and American pressure on Europe. MITUXA’s conclusion is that Europe should preserve trade while rebuilding its ability to choose in sectors where disruption would be difficult to withstand.

From WTO membership to industrial concentration

China joined the World Trade Organization on 11 December 2001. Integration strengthened the connection between its productive capacity and international markets. But that date alone cannot explain Europe’s industrial transformation. Infrastructure, training, investment, scale, public policy and European companies’ own decisions all contributed. [1]

Many European businesses sought lower costs and access to a large market in China. Partnerships, factories and supplier development helped knowledge spread. Beijing also built domestic capabilities and internationally competitive businesses. The European Commission identifies market-access barriers, intellectual-property concerns and technology-transfer requirements in the trading relationship. [2]

The naïveté lay in treating economic integration as a guarantee of political convergence and future reciprocity. Interdependence can raise the cost of conflict, but it also creates instruments of pressure. Control over a component that is difficult to replace can confer more power than purchasing large volumes.

Accountability was another problem. A company answers for profitability; a government may answer for privatisation proceeds. The gradual loss of an industrial ecosystem extends beyond both horizons. Decisions had identifiable owners. The accumulated risks often did not.

What a billion euros a day actually means

In 2025, the European Union imported €559.4 billion of goods from China and exported €199.6 billion. The deficit was €359.8 billion. Dividing these figures by 365 gives approximately €1.53 billion of imports and €986 million of deficit per day. These are averages calculated from annual flows, not observations of individual days. [3]

The reference to a billion euros a day therefore approximates the EU’s goods trade deficit with China. It does not refer solely to clothing, low-cost textiles or parcels sold through digital platforms. Nor does it automatically represent an equivalent destruction of wealth: some imports are machinery, components and products supporting European activity.

The deficit matters because of its scale and composition. The strategic question is where Europe retains technology, production and alternatives. Importing an easily replaceable product differs from relying on a dominant supplier for network equipment, critical materials or industrial components.

Portugal and influence over essential infrastructure

Portugal makes the debate tangible. In December 2011, China Three Gorges was selected to acquire a 21.35% stake in EDP. EDP’s shareholder table consulted for this study records CTG at 22.20%, with a reference date of 31 December 2025. State Grid holds 25% of REN. These stakes give Chinese investors significant influence in businesses linked to essential infrastructure. [4]

They do not establish that China exclusively controls Portugal’s entire energy system. A substantial holding does not automatically mean majority ownership, unrestricted system access or freedom to set tariffs. REN operates within a concession and regulatory framework; ERSE regulates electricity transmission and the associated allowed revenues. [5]

The privatisations took place under intense financial pressure. Portugal’s assistance programme included the sale of holdings in EDP and REN and the reduction of special state shareholder rights. This helps explain the priority attached to raising revenue, but did not mandate a Chinese buyer. Investor selection and the safeguards attached to ownership still mattered. [6]

The political question remains legitimate: were the proceeds assessed alongside the long-term implications of foreign state ownership in strategic infrastructure? A serious answer requires the contracts, available alternatives, governance rights and oversight mechanisms. Neither the shareholder’s nationality nor the sale price alone settles the issue.

Communications and information security

Communications deserve separate scrutiny. Through RENTELECOM, REN provides telecommunications and information-technology services, including fibre-optic connectivity. There is a real connection between energy infrastructure and communications networks. [7]

That connection warrants security scrutiny, but does not prove that Chinese shareholders obtained European secrets or intercepted communications. Corporate information, operational access to equipment and access to communications content are different matters. This study has insufficient public evidence to claim that the EDP or REN shareholdings enabled espionage.

The appropriate response includes independent access audits, network segregation, supplier controls, intervention logs and incident-response capabilities. Scrutiny should cover directors, contractors, software and maintenance. Ownership changes may reduce certain risks, but cannot replace technical and operational security.

French solar and the difference between installing and manufacturing

The energy transition can reduce dependence on imported fuels while increasing dependence on equipment manufactured abroad. In its 2022 solar supply-chain report, the International Energy Agency documented China’s share exceeding 80% across the principal manufacturing stages. This concerns the global industrial chain, not the precise share of panels installed in France. [8]

Installing solar capacity in France does not mean the country has rebuilt the manufacture of materials, cells and modules. Industrial policy should identify the stages concentrating expertise, value and replacement difficulty. An assembly plant on its own may remain heavily dependent on imported components.

Equipment must also be distinguished from fuel. An installed panel can produce electricity for years without further Chinese deliveries. Solar dependence is not identical to the recurring need to import gas. Risks concentrate on expansion, replacement and, depending on system architecture, software, inverters and maintenance.

Europe should avoid a simplistic choice between cheap panels and complete self-sufficiency. Alternative production, geographical diversification, security requirements and procurement that values resilience can reduce vulnerability. There is a cost, however: more expensive equipment may slow installation. Decisions and budgets must acknowledge that tension.

Germany and learning that became competition

Cars demonstrate how a trading relationship can change. German manufacturers helped develop production, suppliers and skills in China while benefiting from that market. Chinese companies subsequently built strength in batteries, electric vehicles, software and development speed. Claiming that Germany taught China everything would disregard Chinese investment and innovation.

Cooperation itself has evolved. Volkswagen’s agreement with XPENG to develop an electronic architecture for vehicles in China illustrates knowledge moving in both directions. This is no longer simply European technology transferred to a local partner. [9]

Employment pressure is real, but precision matters. Volkswagen’s December 2024 agreement envisages reducing the workforce by more than 35,000 at the German locations concerned by 2030. This is a negotiated workforce-reduction objective, not 35,000 dismissals already completed. Chinese competition, domestic costs, technological change, capacity and demand all form part of the context. [10]

There is also evidence of adaptation. According to VDA, Germany produced approximately 1.22 million battery-electric passenger cars in 2025, up 15% from 2024. The industry faces serious competition, but has not disappeared. The question is whether it can turn industrial capacity into competitive products and sustainable results. [11]

Textiles and the scale of small parcels

Textiles belong at the centre of this discussion. Price pressure affects companies, workers and regions with few alternatives to industrial employment. Research covering Portuguese firms between 1995 and 2007 identified negative employment effects among businesses more exposed to Chinese competition in European export markets. The impact therefore extends beyond direct imports into Portugal. [12]

The sector’s history also includes automation, changing consumption, brand strategies, energy costs and specialisation. Some European businesses compete through quality, speed, technical fabrics and service. Their trajectories should be distinguished from production most exposed to price competition.

E-commerce has added an enforcement challenge of exceptional scale. Approximately 4.6 billion low-value consignments, up to €150, entered the EU in 2024, around 12 million a day; 91% originated in China. These figures cover many product categories, not just textiles. Such volumes make safety, declarations and compliance harder to check. They do not establish that every parcel is unlawful. [13]

Competition becomes particularly problematic when compliant producers and importers bear costs that others avoid. The response should focus on traceability, operator accountability, customs controls and effective enforcement of the same requirements for products sold within the EU.

The Union has begun changing the rules. From 1 July 2026, an interim customs duty of €3 applies per distinct tariff category within a small parcel covered by the regime. It is not simply €3 per parcel or per physical unit. Effectiveness depends on collection, enforcement and preventing artificial circumvention. [14]

Russia and the United States in Europe’s calculations

Russia’s war of aggression against Ukraine has made the connection between economics and security clearer. In April 2026, the EU Council included entities located in China, among other countries, in measures addressing supplies of dual-use goods and equipment to Russia’s military-industrial complex. The relevant finding concerns supply networks identified by European authorities; it does not implicate every Chinese company. [15]

Europe cannot assess commercial relations with Beijing without considering that context. It should also distinguish the war against Ukraine from hostile and hybrid activities directed at European countries. The seriousness of those activities does not make the entire EU a direct participant in the same war.

The United States remains an essential ally, but alliances do not eliminate conflicting interests. Tariff threats linked to Greenland, which prompted a joint statement by the presidents of the European Council and Commission in January 2026, show why Europe must also be prepared for pressure from Washington. [16]

The prospect of a subservient Europe expresses a political concern, not an established fact about the intentions of all American officials. Europe’s objective should be to build its own capacity to negotiate and cooperate. Industrial dependence on China, Russian aggression and American pressure are different challenges requiring different responses.

What Europe should do

First, identify dependencies capable of causing systemic damage. Priorities should reflect concentration, replacement time, importance to essential services and the possibility of disruption. Not every import needs an equivalent European production line. Autonomy is the ability to refuse an external demand without paralysing the economy or compromising security.

Second, combine infrastructure security with clear governance. Governments and regulators should understand shareholder rights, critical suppliers and access to systems. Ownership changes should be assessed against their concrete benefits and costs. Buying back stakes without resolving technical dependencies may consume resources while leaving the central problem intact.

Third, create conditions for competitive production. Energy, electricity networks, permitting, skills, financing and the single market influence investment location. Subsidising a factory without addressing those factors may merely postpone its closure. Support should have verifiable objectives, deadlines, private capital at risk and consequences when commitments are not met.

Fourth, use public procurement and standards proportionately. Lifetime costs, security, repairability and continuity of supply deserve weight alongside the initial price. Transparent criteria are essential to prevent favouritism and the protection of inefficient suppliers.

Fifth, diversify without replacing one absolute dependence with another. Recycling, cooperation with partners and European production can complement each other. The Critical Raw Materials Act sets benchmarks for 2030, including a desired limit on concentration in a single third country. These are policy objectives, not capacity already built. [17]

Finally, measure actual outcomes. Europe should track effective production, productivity, supplier-replacement times, compliance and commercial demand. Investment announcements and subsidy totals do not, by themselves, demonstrate greater autonomy.

Who pays for reducing dependencies?

Reindustrialisation and diversification have costs. Consumers may pay more for some products; companies may face additional investment and lower margins; taxpayers may fund infrastructure, training or incentives. Workers also face transitions. Concealing these burdens weakens a policy’s legitimacy when the bill arrives.

The 2024 Draghi report estimated additional annual investment needs of €750–800 billion for Europe’s broader competitiveness objectives. This is not an estimate solely for reducing dependence on China, nor a bill to be financed entirely by governments. It illustrates the scale of the investment challenge. [18]

The distribution of costs should be explicit. Temporary support for vulnerable households can accompany price changes; training should connect to concrete employment opportunities. European coordination should prevent countries with the greatest fiscal capacity from capturing all projects and deepening inequalities within the single market.

Three possible paths

Under continued erosion, Europe retains considerable consumption and regulatory power but loses productive capabilities in decisive areas. Dependence increases gradually and becomes more apparent during a crisis. The absence of an immediate breakdown can conceal deterioration.

Under ineffective protection, tariffs and subsidies increase costs without sufficiently improving productivity. Protected businesses survive on permanent support, consumers pay more and vulnerabilities merely change form. Public intervention becomes an end in itself.

Under selective recovery, Europe chooses priorities, strengthens capabilities and diversifies supplies while remaining open. It accepts the cost of some redundancy where risks justify it and preserves competition elsewhere. This is the path we favour. We assign no numerical probabilities: these scenarios help test policy choices and monitor outcomes.

The MITUXA view

For investors, strategic importance does not guarantee a good investment. A sector can receive public support and still deliver poor returns because of excessive capital expenditure, competition, debt or weak profitability. Cash generation, capital requirements, differentiation and dependence on political decisions require company-level scrutiny.

The broader political conclusion is that economic security has a price, and so does having no alternative. Europe’s error was to accept certain dependencies without adequately measuring them. Correcting that mistake requires choices, execution and accountability, so that Europe’s capacity to decide matches the scale of its market.

Sources and scope

Data periods are specified in the text. Policy proposals and scenarios are MITUXA’s interpretations. This edition was published on 12 October 2026.

MITUXA — Beyond the Obvious

Questions and discussion: questions@mituxa.com

Independent research for information and discussion. This article is not personalised investment advice.