Europe's deindustrialization anxiety is a complex issue that cannot be easily attributed to China's subsidies. While European policymakers are taking steps to support domestic industries and enhance supply chain security, the underlying causes of Europe's manufacturing challenges are multifaceted and deeply rooted in the continent's own economic and regulatory landscape.
One of the primary factors is the high energy costs that have eroded Europe's industrial competitiveness. Since the Russia-Ukraine conflict, Europe has shifted away from Russian energy, relying more on expensive liquefied natural gas imports. This has significantly increased costs for energy-intensive industries, such as chemicals, steel, aluminum, and cement. The carbon pricing and regulatory burdens have further squeezed industrial margins, with high EU carbon prices and the rollout of the Carbon Border Adjustment Mechanism pushing up compliance costs for industries like steel, cement, fertilizers, and aluminum.
Europe's manufacturing challenges also stem from structural issues, including high labor and compliance costs, fragmented industrial policies, and insufficient investment. A long-term tilt toward finance and services has weakened manufacturing capacity and supply chain resilience. The coexistence of stringent regulation and market fragmentation has led to divergent data standards, hindering cross-border data flows and making it more difficult to support AI training and digital transformation. This has weakened the efficiency of production and supply chains, weighed on productivity, innovation capacity, and global competitiveness.
The anxiety facing European manufacturing is also fueled by rapid changes in the external competitive environment. The US has strengthened efforts to revive domestic manufacturing and attract high-end industries back home through initiatives like the Inflation Reduction Act and the CHIPS and Science Act, creating a clear 'siphon effect' on European companies and capital. Meanwhile, new industrial clusters in economies like Japan, South Korea, and Southeast Asia are increasing policy support and investment incentives in areas such as new energy, electronics, automobiles, semiconductors, and critical minerals, actively seeking to capture the global industrial shift.
Instead of shifting blame to China, Europe should focus on finding a new position and partnership within the global division of labor. The continent maintains advantages in areas such as high-end manufacturing, green technologies, and standard-setting, while China possesses significant strengths in comprehensive industrial chains, market scale, and application scenarios. Amid the restructuring of global industrial chains, the upcoming China-EU economic and trade consultations provide a crucial opportunity to move from 'anxiety toward constructive cooperation'.
In conclusion, Europe's deindustrialization anxiety is a complex issue that requires a multifaceted approach. While China's industrial policies may be a factor, they are not the sole cause of Europe's manufacturing challenges. Europe must address its own structural issues, such as high energy costs, regulatory burdens, and fragmented industrial policies, to regain its competitive edge in the global manufacturing landscape.
