Why European Companies Are Losing the War Against China’s State-Backed Machine
European companies are not competing on a level playing field. They are competing against the entire machinery of the Chinese state. This isn’t a metaphor. In China, the lines between private enterprise, government oversight, and national strategy are not blurred — they are erased. Whether it’s the automotive sector, telecommunications, or renewable energy, what the EU faces is a fully integrated ecosystem where every actor, public or private, operates as a cog in a broader strategic machine.
In Europe, businesses operate under the assumption that competition is about innovation, efficiency, and meeting market demand. In China, competition is a state-coordinated endeavor. Private firms don’t just compete; they collaborate — with government backing, subsidies, and access to vast resources. The Chinese Communist Party doesn’t merely regulate; it directs. The result is a system where the so-called “private sector” in China functions as an extension of state policy, designed to outmanoeuvre competitors globally.
In contrast, the EU treats business, research, and defence as distinct silos. Companies are left to fend for themselves. Research institutions focus on academic excellence without a clear link to industrial or strategic outcomes. Defense strategies remain fragmented across member states. This lack of coordination isn’t just inefficient; it’s dangerous.
Let’s be blunt: this is asymmetry, pure and simple. The EU operates in a fragmented, laissez-faire manner, while China deploys its resources like a finely tuned war machine. This asymmetry doesn’t just give China a competitive edge — it reshapes industries and undermines security. It forces European companies to compete not with their Chinese counterparts but with the might of an entire authoritarian state apparatus.
If you want a term for this, call it “systemic competition.” But let’s not sugarcoat it: this is economic warfare by another name. China has mastered the art of using its private sector as a weapon, while Europe clings to outdated notions of fair competition and mutual benefit.
The automotive industry illustrates the point. Chinese electric vehicle manufacturers don’t operate in isolation — they are funded, supported, and shielded by the state. This is not a market in any meaningful sense. European automakers, bound by strict environmental regulations and market-based financing, are left scrambling to keep up. Meanwhile, China floods global markets with cheaper alternatives, backed by state subsidies and economies of scale that no single company can match.
The problem goes beyond economics. China’s integration of its private sector into national strategy spills into defence and security. Elsewhere you may have seen me calling for a better joining up of the dots in the EU which should be ppart of a alrger and more coherent concept of security. Universities conduct research that feeds directly into military applications. Companies like Huawei are not independent actors — they are state-aligned entities with obligations to share data and technology under Chinese law. This is not paranoia; it’s policy.
Europe needs to wake up. It cannot afford to continue treating China as a traditional competitor. This is not a contest of equals. It is a clash of systems, and the stakes are existential. If the EU wants to survive this century as a serious player, it must rethink everything — from how it regulates its markets to how it coordinates its industries. The alternative is not merely decline; it is irrelevance.
