'China Shock 2.0' a myth that will collapse

As China and Europe mark over 50 years of diplomatic relations, cooperation remains the cornerstone of the relationship.

However, rising geopolitical rivalry has sharpened Europe's anti-China rhetoric of "de-risking" and economic security. Among the latest catchphrases, none is more politically expedient yet intellectually weak than the so-called "second China shock", or "China Shock 2.0".

The original "China Shock" thesis, propounded by United States economists David H. Autor, David Dorn and Gordon H. Hanson, argued that China's entry into the World Trade Organization and subsequent export boom disrupted the US labor market.

Washington revived the narrative in 2024, this time claiming that China's rise in electric vehicles, clean energy and advanced manufacturing once again threatens Western industry.

Europe quickly picked up the script. At the Davos summit in 2025, European Commission President Ursula von der Leyen warned of a "second China shock" to world trade caused by Chinese export subsidies. This argument resurfaced at the G7 summit months later, with calls for a coordinated response to China.

European media and think tanks depicted Chinese products as "flooding" European markets and endangering jobs.

While the politics is loud, the economics is far less convincing. The claim that Chinese exports are driving Europe's industrial decline mistakes symptoms for causes. Trade imbalances are not moral tales of one economy "attacking" another. They reflect market demand, industrial specialization and shifting comparative advantages.

China's industrial upgrading has naturally reduced its dependence on some European high-end products.

At the same time, Chinese exports meet the actual demands of European consumers and industries. Blaming Europe's competitiveness challenges on a "second China shock" is therefore convenient but analytically flawed.

Europe's deeper challenge lies closer to home. Traditional sectors such as automobiles and machinery are under pressure from the green and digital transition. European firms face high energy costs, expensive labor and heavy regulation.

At the same time, US industrial subsidies, from the Inflation Reduction Act to the CHIPS Act, are pulling investment across the Atlantic.

China's rapid advances in renewable energy, AI and electric vehicles have intensified Europe's anxiety. But anxiety is not analysis.

Instead of addressing structural weaknesses directly, some policymakers have externalized them. Under the banner of "de-risking", economic cooperation increasingly risks becoming "de-cooperation" — a path more likely to weaken Europe's innovation capacity than strengthen it.

Europe's energy policy offers a revealing example. Its effort to reduce dependence on Russian energy came with heavy economic costs. Energy-intensive industries reduced production, relocated investment or shut facilities entirely.

German chemical giant BASF scaled back operations in Europe while expanding in China, drawn by market size, stable supply chains and lower operating costs.

That reality is significant. Much of Europe's industrial strain stems from its own policy choices, not imported Chinese goods. But complex domestic problems rarely make effective political slogans.

"Cheap Chinese products" are easier to sell to frustrated voters than debates over energy strategy, debt burdens or regulatory reform. Blaming China for lost jobs is more electorally rewarding than admitting policy mistakes.

Europe's economic malaise owes as much to weakening global demand as to its own shortsighted trade policies and mounting debt burdens. China is not the chief culprit behind Europe's troubles. If anything, it remains a vital opportunity.

European high-end manufacturing and services continue to command substantial market share in China, while Chinese intermediate and consumer goods help keep Europe's economy running. To pin Europe's economic stagnation on China is not a serious diagnosis but a convenient deflection that sidesteps harder truths and excuses policy missteps.

Misdiagnosing Europe's problems can produce bad policy: more protectionism, more ideological filtering of trade, and deeper suspicion toward one of Europe's largest economic partners. In the long run, that risks narrowing Europe's own development space.

Not all European voices accept this logic. French Nobel laureate Philippe Aghion has argued that economic development is fundamentally a process of innovation and creative destruction.

China's rise is part of that global transformation, not an anomaly to be contained. Europe can respond creatively — or defensively.

Protectionism will not restore competitiveness. Politicizing economic challenges will not lower energy prices, revive productivity or solve investment shortages. A more practical path is cooperation.

In green development, China and Europe are natural partners.

Europe needs rapid decarbonization; China leads in clean-energy manufacturing, electric vehicles and large-scale green supply chains.

Without China's participation, Europe's energy transition becomes far harder and more expensive.

The same logic applies to the digital economy. Europe brings regulatory expertise; China offers market scale and innovation ecosystems. Collaboration on standards, technology and governance could create shared gains rather than zero-sum rivalry.

Trade tells a similar story. China and Europe are deeply intertwined economically. Their commercial ties support millions of jobs, investment flows and industrial networks on both sides.

European companies continue to profit from the Chinese market, just as European industries benefit from Chinese intermediate and consumer goods.

China has never sought to "shock" Europe. The "second China shock" narrative reflects Europe's growing competitiveness anxiety and the search for an external culprit.

If Europe approaches China with greater strategic calm — and with a clearer understanding of its own economic challenges — cooperation, not confrontation, will be the correct response.

And once rhetoric collides with economic reality, the myth of a "second China shock" will begin to collapse under its own contradictions.

The author is the deputy director of the Department of Central and Eastern Europe at the Institute of European Studies, Chinese Academy of Social Sciences.

The views don't necessarily reflect those of China Daily.

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