Shifting China–EU Ties and Lessons for India

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While “China’s success” in the trade war with the United States (US) and the China-Japan showdown dominate global headlines, significant changes are also emerging in China-Europe relations that deserve closer attention.

On one hand,  European leaders are lining up to make high-profile visits to China under the pressure of the US unpredictability, the stalemate in the Ukraine war, and the downward pressure on the European economy, Notably, a series of visits to China by the King of Spain, the Vice Chancellor of Germany, and the French President, among others, have taken place lately, reportedly to prepare ground for inviting China to attend the upcoming G7 summit in France and also to show goodwill and extend support for China’s hosting of the 2026 Asia Pacific Economic Cooperation (APEC) Summit.

Despite the high-profile engagement drive, deep distrust and discontent have been brewing between China and the European Union (EU), as conflicts of interest in the economic and trade realm continue to intensify.

However, on the other hand, despite the high-profile engagement drive, deep distrust and discontent have been brewing between China and the European Union (EU), as conflicts of interest in the economic and trade realm continue to intensify. For example, there has been a recent social and public opinion storm in certain European countries over the rapid expansion of Chinese e-commerce platforms, including SHEIN and TEMU in Europe. In markets such as France, Germany, and Spain, these platforms are attracting a large number of young and low-to-middle-income consumers with their extremely low prices.  For SHEIN, in the first half of 2025, its average monthly unique visitors in the EU reached 146 million, representing a year-on-year increase of 11.6 percent, with more than 27.3 million users in France. TEMU followed closely behind with 116 million monthly active users. The aggressive low-price strategy of these Chinese e-commerce brands is rapidly jolting the pricing systems of traditional retail brands in luxury brand capitals such as Paris and Milan.

French politicians and local businesses have strongly called for stricter regulation of these Chinese platforms. The "parcel tax" being discussed in the French Parliament aims to eliminate tariff exemptions for imported goods priced below €150, to "restore a level playing field” and protect hundreds of thousands of local handicrafts and jobs within small and medium-sized enterprises.

At the EU level, regulatory and political reactions are also accelerating. In October 2025, members of the European Parliament directly questioned the European Commission whether platforms such as SHEIN, TEMU, and AliExpress were exploiting a "regulatory vacuum" to flood the market with "illegal, non-compliant, and environmentally harmful goods," thereby causing devastating damage to EU businesses. The European Textile Federation (EURATEX) and several national retail industry associations called for accelerated reforms, including the removal of customs duty exemptions for parcels and the imposition of a €2 handling fee per parcel. As a result, the European Commission decided to bring forward the removal of customs duty exemptions to 2026, instead of the previously planned mid-2028. The United Kingdom (UK) is facing similar pressure, with local e-commerce brands such as Boohoo publicly complaining that TEMU and SHEIN are eroding their market share.

Beyond e-commerce platforms, Chinese investment is expanding in various industries across Europe. For example, in the space of new energy vehicles (NEVs) and batteries, BYD's sales in Europe reached 80,800 units in 2025, three times the figure in the same period in 2024. The brand is also currently building its first European factory in Hungary, while also planning a second factory in Spain or Türkiye. Battery giant Contemporary Amperex Technology Co., Limited (CATL) has also launched a joint venture with Stellantis in Spain to build a 50GWh annual capacity super factory, employing 4,000 local workers. Another joint venture, Envision AESC, will supply batteries to the Renault-Nissan Group at its factory in Douai, France.

The EU appears to be truly “panicking” over the “China tsunami” in European markets.

In the digital channel space, JD.com has quietly acquired a stake in French home appliance retail giant Fnac Darty and will launch the JoyBuy platform by the end of 2025, aiming to challenge Amazon. This move has raised concerns in France, as Fnac Darty possesses a vast amount of customer data and a logistics network, with some media outlets claiming that "digital sovereignty" is being challenged. Meanwhile, TEMU's partnership agreement with La Poste, utilising the state-owned postal system for last-mile delivery, has sparked strong protests from local retail brands, who have called it a "Trojan horse." The EU appears to be truly “panicking” over the “China tsunami” in European markets.

Meanwhile, in China, people have been fuming over the Nexperia incident, which is being domestically presented as a "precision strike" carried out against China at Washington’s behest, such as the high-profile Meng Wanzhou case. Many in China believe that the incident is far from over and that the progress thus far falls short of China’s expectations, despite Western media claiming otherwise.

To put it into perspective, the dispute between China and the EU began as early as 2024, when the EU imposed anti-subsidy tariffs to protect its new energy vehicle sector, while China imposed anti-dumping duties and initiated investigations into certain European imports. China thereby accelerated its efforts to establish factories in Europe to circumvent tariffs, while the EU proposed to "set conditions" for Chinese investment.

Despite EU tariff barriers, China's new energy vehicle exports to Europe increased by 52 percent year-on-year in the first nine months of 2025, reaching 2.32 million units. Meanwhile, in the first half of 2025, European car exports to China decreased by 42 percent year-on-year.

China's supposed monopoly over rare earth controls and the chip supply crisis caused by the Nexperia incident have eventually led even Germany to waver.

Germany initially took a comparatively conciliatory stance towards China in the 2024 EU-China new energy vehicle dispute due to the substantial interests of its automakers in the Chinese market. However, it now sees its fortunes shift. China's supposed monopoly over rare earth controls and the chip supply crisis caused by the Nexperia incident have eventually led even Germany to waver. Now, with German automakers facing chip supply crises on the production side, declining sales in China, and lagging behind Chinese automakers in new energy technology, Germany is also considering a “tariff” against China.

Chinese newspapers are abuzz with news about how the EU is “studying trade options with China and is even compiling a retaliatory list", how it is considering new trade measures requiring some Chinese exporters to supply critical raw materials to EU stockpiles when exporting certain goods to the EU, how the European Commission is considering setting a target of up to 70 percent "Made in Europe" for products such as automobiles in its upcoming Industrial Decarbonization Accelerator Act (IDAA) to reduce dependence on Chinese goods and also, how the EU may consider using the "economic nuclear weapons against China —the Anti-Coercion Instruments Act”- if its current programme (ResourceEU) fails to reduce EU’s over-dependence on China.

The inference being drawn in China is that Chinese companies' investments in Europe are no longer safe. There’s panic building up “If China loses the European market, where can it make up for the losses on the American side?... How can it continue to acquire key technologies?” The EU episode has also led to a rising chorus in China about “how China’s super-strong productivity, which has been its biggest strength, is quietly becoming its biggest weakness under current global situation”, “be it the US, the EU or India, countries with large markets are increasingly viewing China as the biggest threat”,  “be it Tik Tok, Vivo or Nexperia - Chinese investments are increasingly becoming vulnerable in overseas market and are being left to fight alone.”

One view is that China must confront the EU with strength and demonstrate through action the consequences of harming China's interests, rather than resorting to persuasion and reasoning.

How to deal with the EU has thus become a big debate in China. One view is that China must confront the EU with strength and demonstrate through action the consequences of harming China's interests, rather than resorting to persuasion and reasoning. Otherwise, the Nexperia case will not be the last of its kind. The other view is that China must not attack on all fronts. Instead, it must balance its relationship with the big yet “weakening” European manufacturers, reconsider the EU’s proposal for tech transfer in power battery and other sectors, and seek to have some common ground with EU on intellectual property rights, which will not only undermine the Atlantic Alliance but also create a more favourable external business environment for Chinese enterprises going global through the Belt and Road Initiative (BRI).

Nevertheless, the broader consensus is that China should combine both conventional (building an overseas security system, strengthening the fight against sanctions, interference, and "long-arm jurisdiction, accelerating the development of a legal system and capabilities related to foreign affairs, and improving mechanisms for international commercial mediation, arbitration, and litigation) and unconventional methods (such as in EU’s case, dividing and playing one EU country against the other ) to improve its “smart power” and protect its own interest and the interest of Chinese enterprises in overseas markets.

India, on its path to becoming the world's third-largest consumption market, must closely monitor the developments in China-Europe relations. These developments could not only offer valuable lessons for India but also create new opportunities for cooperation between India and the European Union.

Antara Ghosal Singh is a Fellow at the Strategic Studies Programme, the Observer Research Foundation.

• International Affairs
• China
• European Union
• India
• USA and Canada
• china eu relations
• china europe ties
• eu china corporation
• eu china trade deal
• parcel tax
• us china trade relations
• us china trade war

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