Europe’s struggle to compete with China ramps up

{"text":[[{"start":6.96,"text":"Businesses grow best in fertile soil — and Europe’s is becoming arid. The European Commission accepts that companies in the EU are suffering from high energy prices, bureaucracy and cheap imports, especially from China. Many UK businesses say they are faring no better."}],[{"start":24.02,"text":"Some still thrive, from Germany’s specialist employment agency Soorce (10th on the latest FT-Statista ranking of Europe’s Long Term Growth Champions), to top-of-the-table Yorkshire Gas and Power, a business energy provider that almost doubled revenues annually between 2015 and 2025."}],[{"start":41.96,"text":"IT and software remains the standout sector, accounting for one in five companies on the list. Construction and engineering, and manufacturing, constitute the second and third biggest sectors with 8 per cent and 7.7 per cent, respectively."}],[{"start":57.48,"text":"But despite the successes of the companies in this year’s ranking, European businesses face considerable challenges, especially from international competitors able to provide vast quantities of lower-cost goods, such as Chinese businesses."}],[{"start":71.32,"text":"The effects on earnings and jobs of so-called “dumping” by Chinese companies are so severe that analysts have dubbed the phenomenon “China Shock 2.0”. There have been efforts to respond. In 2024, Brussels slapped tariffs on Chinese electric vehicle imports, after an investigation concluded they were heavily subsidised."}],[{"start":91.32,"text":"In fact, 2024 marked a record year for the number of EU trade defence measures. Yet, the trade deficit in goods with China has hit €1bn a day and continues to grow. Commission president Ursula von der Leyen recently warned she would not allow China to “deindustrialise” Europe."}],[{"start":108.88,"text":"Brussels and Beijing have been talking, with the threat of more tariffs in the background. They agreed a deal to more than halve exports of Chinese hybrid cars to the bloc in October."}],[{"start":118.2,"text":"Meanwhile, France and Germany have proposed a faster response tool, which would quickly close off access to the EU market for certain products in any trade conflict."}],[{"start":128.16,"text":"Some sectors have been highlighted as particularly at risk. For example, Sylvie Lemoine, deputy director-general of chemicals lobby group Cefic, said recently that the industry needed “faster and more effective protection”."}],[{"start":null,"text":""}],[{"start":140.72,"text":"The European Commission has just started an investigation into alleged dumping of acetylsalicylic acid, used to make aspirin, as well as other critical materials."}],[{"start":149.24,"text":"But at the same time, Lemoine told a recent Commission conference, the last European producer of acetyls, necessary for the production of acetylsalicylic acid, has mothballed its plant, citing punitive energy prices."}],[{"start":163.66,"text":"“We may get protection. We may be able to continue to produce it in Europe, but we don’t have our own suppliers in Europe, because they’re shutting down,” Lemoine said."}],[{"start":173.12,"text":"“So it’s not only about trade defence, it’s also about . . . energy costs. They are just not competitive at all.”"}],[{"start":180.08,"text":"The EU is seeking to exclude overseas competitors from some parts of its market via a series of policies that prioritise domestic companies."}],[{"start":189,"text":"They include limits on subsidies and public procurement in key sectors as the EU attempts to increase the share of GDP from manufacturing from 14 to 20 per cent by 2035. Its Made in Europe policies include the proposed Industrial Accelerator Act (IAA), which could cut companies from outside the single market out of many supply chains."}],[{"start":null,"text":""}],[{"start":209.16,"text":"A separate initiative, DiversifyEU, is under consideration. The bloc’s intention is to reduce reliance on countries such as China, the US and India for key inputs including semiconductors and pharmaceutical ingredients. In some cases, especially for some critical raw materials, China accounts for almost all the supply."}],[{"start":229.32,"text":"Helen McEntee, trade minister of Ireland, which holds the EU rotating presidency, told reporters the bloc should tread carefully to avoid “hindering” its own companies. “We have very strong integrated supply chains and . . . if we’re looking to move away from certain elements of the supply chain we need to make sure that those products and those elements are available to our businesses . . . either within the EU or elsewhere.”"}],[{"start":252.72,"text":"Wim Michiels, chief executive of Proviron, a chemical producer in Belgium, says reducing energy costs and the burden of regulation should be the top priority."}],[{"start":262.44,"text":"His company makes plasticisers, de-icers and coolants used in data centres and the food and drink industry. It buys some raw materials in China because they are cheaper than alternative suppliers. “We could be less dependent, but it is more expensive.”"}],[{"start":277.36,"text":"Proviron also sells many of its products there. “Europe still has a strong base in speciality chemicals. We can compete on quality,” Michiels says. However, he says the industry needs support paying energy bills several times higher than those in China or the US. He also criticises the constant tweaking of rules."}],[{"start":null,"text":""}],[{"start":298.88,"text":"Europe should “set the bar high” on sustainability, labour rights and standards. “But it should be kept stable — at least seven years — and regulate what we have to do, not how we have to do it, all the nitty-gritty detail,” he adds. It should also enforce controls on imports. “We work to these standards and then have an open door to other countries that do not.”"}],[{"start":322.28,"text":"Still, the family-owned business started by his father Leo in 1977, which employs 245 people, remains profitable. His and his brother Mark’s children want to take over, he says. But if they do not, they have plenty of suitors."}],[{"start":338.28,"text":"“It’s generally Chinese companies that want to buy us,” Michiels says. However, he says he would rather choose one of the two European multinationals that have also expressed an interest because their proposition appeared more likely to benefit long-serving employees."}],[{"start":338.78,"text":"The multinationals, he says, also “need our spirit”."}],[{"start":358.12,"text":"Many other SMEs have taken Chinese money, says Alicia García Herrero, chief economist for Asia Pacific at Natixis, the French bank. “There is a lot of acquisition of smaller companies by China,” she says."}],[{"start":369.8,"text":"“It makes a lot of sense for a number of reasons. Firstly, these companies are cash-strapped because of the China Shock 2.0 and secondly they’re in sectors where China basically is massively competitive. But China fears . . . potentially new tariffs or ‘Made in Europe’ rules,” she says, adding: “They [the Chinese companies] will need local production to get access.”"}],[{"start":394.64,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1794396875_2941.mp3"}