By Si Yang, Vision Times
European Commission President Ursula von der Leyen warned this week that Europe is experiencing a new “China Shock,” as Chinese industrial overcapacity increasingly spills into global markets and puts pressure on European manufacturers.
Speaking during a G7 leaders’ luncheon on economic growth, security, and resilience on June 15, von der Leyen called for coordinated action among advanced economies to address what she described as growing global economic imbalances driven in part by China’s state-led growth model.
“We are seeing a new ‘China Shock,'” von der Leyen said during the event in Évian-les-Bains, France. “As China’s economy slows down, Beijing floods global markets with subsidized overcapacity that its own market cannot absorb.”
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A growing trade gap
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The warning coincided with new data from Eurostat showing that the gap between European Union imports from China and exports to China reached 31.9 billion euros (about $37 billion) in April alone.
The phrase “China Shock” originally referred to the wave of economic disruption that followed China’s entry into the World Trade Organization in 2001. Access to Western markets helped accelerate China’s export boom, contributing to the decline of manufacturing industries in parts of the United States and Europe.
Today, European policymakers increasingly argue that a second wave is underway—this time driven not by low-cost consumer goods, but by heavily subsidized industries such as electric vehicles, batteries, solar panels, chemicals, and industrial machinery.
Chinese EVs gaining ground
The EU has already taken steps to counter what it views as unfair competition. Following a year-long anti-subsidy investigation, the EU in raised tariffs in 2014 on Chinese electric vehicles from 10 percent to as high as 45.3 percent.
Yet Chinese automakers continue to expand their presence in Europe. According to automotive research firm Dataforce, Chinese brands sold 112,992 vehicles in Europe in April 2026, a 114 percent increase from a year earlier, lifting their market share to nearly 10 percent.
Concern over the issue has extended beyond the auto sector. European policy analysts estimate that hundreds of product categories are facing pressure from Chinese overcapacity, including steel, batteries, solar equipment, chemicals, and industrial machinery.
A June report by the European Policy Centre argued that Europe is confronting an unprecedented challenge from Chinese exports and warned that additional industries could come under pressure in the coming years.
EU response: ‘De-risk, not decouple’
Von der Leyen emphasized that the EU is not seeking economic separation from China. “Our approach is de-risking, not decoupling,” she said. She outlined a strategy that includes strengthening domestic manufacturing, diversifying supply chains through free trade agreements, updating investment screening mechanisms, and deploying trade defense tools such as anti-subsidy measures.
The EU is also advancing its proposed Industrial Accelerator Act, which is designed to strengthen Europe’s competitiveness, economic security, and strategic autonomy. At the same time, Brussels is reviewing inbound and outbound investment frameworks to ensure European capital and technology do not inadvertently strengthen the military or intelligence capabilities of strategic competitors.
While defending Europe’s efforts to protect its industrial base, von der Leyen argued that unilateral measures alone would not be enough. “But unilateral action has its limits,” she said. “To be effective, we must work together with like-minded partners.”
Call for coordinated G7 action
She pointed to the decline of magnet manufacturing in Europe, the United States, and Japan as an example of how critical industries can become concentrated in a single country. “No single country should control 80 to 90 percent of the supply of critical raw materials and downstream products such as magnets,” she said. “Remember that Europe, the United States, and Japan all once had magnet manufacturing industries, until they were pushed out by China.”
Von der Leyen urged G7 countries to jointly monitor developments in key industries and technologies and coordinate policy responses. “G7 action can increase our leverage,” she said, “and compel China to take greater responsibility for the consequences of its state-driven growth model.”
EU leaders are expected to continue discussions on trade imbalances and industrial competitiveness during a summit in Brussels on June 18–19. Following recent meetings on protecting strategic industries, the European Commission reiterated that while engagement with China remains important, the current trade relationship is increasingly difficult to sustain.
“China is a key partner, and engagement and dialogue will continue,” the Commission said in a statement. “At the same time, the current state of trade and investment relations is unsustainable.”
