Europe copies China’s industrial playbook: A protectionist turn?

When the European Union (EU) announced its latest industrial policy development, the EU Industrial Accelerator Act on 4 March 2026, it was heavily criticised by China’s Ministry of Commerce as containing “serious investment barriers and institutional discrimination” and warned that it would “further increase uncertainty for Chinese enterprises investing in the EU”.

The EU’s Industrial Accelerator Act sets out new investment criteria for strategic sectors such as electric vehicles (EVs) and batteries. It introduces conditions related to local content requirements, linking access to public procurement and funding to specific conditions, local value creation, regulatory approval for foreign investments, and joint venture structures. In China, these measures are widely viewed as protectionist and as creating new barriers to foreign investment. 

In addition, the framework includes mandatory screening for investments exceeding 100 million euros in areas such as batteries, EVs, solar photovoltaic (PV) and critical raw materials, particularly where investors originate from countries controlling more than 40% of global manufacturing capacity. Approval is contingent on meeting at least four out of six criteria, including a requirement that a minimum of 50% of the workforce be based in the EU.

These measures mirror longstanding practices in China’s own industrial policy, where European firms have historically faced joint venture requirements, technology-sharing expectations, local content requirements and state oversight of investment approvals. To avoid high import tariffs, original equipment manufacturers (OEMs) had to establish full production capabilities within China. Take for example, German car manufacturer Volkswagen (VW). 

When VW entered the Chinese market in 1984, it created a joint venture with SAIC, China’s largest state-owned carmaker. VW was required to prioritise the employment of local Chinese personnel over foreign expatriates. This included training of thousands of local workers and engineers. VW was also required, via licensing agreements, to transfer technology for older models to its Chinese partners. 

Over time, this supported the development of domestic capabilities and “self-owned intellectual property rights”. These arrangements gradually shifted from technology import to local innovation. Today, VW operates major R&D centres in China focused on developing technologies “in China, for China”. In 2024, VW and SAIC renewed and extended their partnership by ten years to 2040. 

Europe is now to some extent copying China’s successful industrial policy playbook with a “Made in Europe for Europe” component embedded in the EU’s Industrial Accelerator Act by prioritising local production, value creation and workforce participation. Therefore, rather than representing a closure of the European market to Chinese investments, the Act reflects a convergence in industrial policy approaches between the EU and China, which are both driven by concerns over economic security, supply chain resilience and strategic autonomy. 

There is also a critical political economy dimension to this, namely Europe’s concerns about deindustrialisation. Europe’s tightening stance is not only about economic security, but also about its fear of deindustrialisation, particularly in the automotive sector, which is central to employment, regional economies and small businesses acting as suppliers to car manufacturers (especially in Germany and central Europe). China needs to take these concerns seriously.

Germany’s industry lost 120,000 jobs in 2025 of which 50,000 losses occurred in the automotive sector. The rapid inflow of low-cost Chinese EVs, batteries and other technologies risks further undermining domestic manufacturers and accelerating factory closures. This dynamic would fuel populist politics and economic nationalism, ultimately weakening Europe. Right-wing populist parties, such as the AfD in Germany, the National Rally in France, and the Freedom Party (FPÖ) in Austria, have already capitalised on this dissatisfaction of workers and job insecurity. 

An economically weakened and politically destabilised Europe would carry clear strategic downsides for China: it would be more likely to adopt hard protectionist measures, become less predictable as a partner, and retreat from open economic engagement. At a time when the US under the Trump administration remains unpredictable, maintaining Europe as a stable and reliable counterpart is of heightened importance. A weakened Europe would also be less able to cooperate on shared global priorities, including climate action, trade and the functioning of multilateral governance. For these reasons, it cannot be in China’s strategic interest to contribute to Europe’s industrial decline.

To be sure, the Industrial Accelerator Act is not without flaws, as many analysts have noted. Ambitions such as increasing industrial production to at least 20% of the EU’s gross value added by 2030, up from 14.3% in 2020, are widely viewed as overly optimistic and potentially counterproductive.

While the new framework introduces additional complexity for Chinese investors, it does not eliminate opportunities. On the contrary, it could incentivise deeper forms of market engagement from Chinese companies and China’s commitment to Europe’s industrial base (such as local partnerships, sourcing and production within Europe), allowing Chinese firms to maintain long-term market access while avoiding more restrictive trade measures like tariffs. 

This dynamic is particularly evident in the battery sector, where Chinese firms such as CATL are already pursuing or expanding investments in European gigafactories through joint ventures with European automakers. For example, Stellantis and CATL created a new joint venture, Contemporary Star Energy, S.L., in 2025 and are investing 4.1 billion euros in a lithium iron phosphate battery plant in Spain, creating more than 4,000 direct jobs locally.

Two additional examples of EU-China battery cooperation are the joint venture between Volkswagen and Gotion High-Tech in Germany, as well as CATL’s battery plant in Hungary. To further strengthen such partnerships, the Industrial Accelerator Act is likely to place greater emphasis on long-term skills transfer, workforce development, and local value creation. At the same time, some projects (notably CATL’s Hungarian facility) have faced scrutiny over compliance with local environmental regulations, highlighting the importance of aligning foreign investments with EU standards. 

Despite tensions and ongoing negotiations (both within Europe and with trading partners) that will follow in the coming months, the Act could reshape EU-China economic relations towards more reciprocal and structured forms of industrial cooperation, thereby supporting win-win outcomes.

The decisive test will be whether both sides can move beyond a narrow confrontation over market access and instead use this moment to build jointly integrated industrial ecosystems for future technologies, particularly those underpinning the decarbonisation of industry and transport sectors.

For the EU Industrial Accelerator Act to become an opportunity rather than a source of friction, China will need to adjust its approach. This begins with taking European concerns about deindustrialisation and manufacturing job losses seriously, particularly in the automotive sector, which sits at the heart of Europe’s economic and political stability. 

Rather than relying on export-led strategies that risk overwhelming domestic EU industries, Chinese firms will need to pivot towards co-development models that embed them more deeply within Europe’s industrial landscape. This means creating local jobs, engaging in genuine technology co-development, and integrating into European value chains through long-term partnerships. In essence, the shift required is strategic: from acting primarily as a market access seeker to becoming a co-investor in Europe’s industrial future.

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