RaboResearch says China’s growth remains anchored in a production-led model that has been weakened by the property downturn, a debt overhang and soft domestic demand. With US market access narrowing, the research argues Europe becomes the natural outlet for Chinese manufacturing exports. It adds that while lower-priced, higher-end imports can help European buyers, they can also displace local output, compress margins and deter capital investment; ECB research is cited as suggesting these adverse effects may dominate, even before factoring in longer-term scarring and strategic vulnerabilities.
China’s Manufacturing Model and Export Shift
The note says Beijing is unlikely to curb capacity, subsidies or exports quickly because manufacturing underpins growth, employment, technological upgrading and autonomy, and a rapid shift would bring immediate costs.
Strategic Leverage and Europe’s Position
China is also portrayed as holding leverage through critical materials and supply chains, enabling selective retaliation, which leaves Europe exposed to export pressure as economic-security frictions rise. RaboResearch adds that China has an advantage in a sudden escalation, whereas Europe’s hand improves over time if the EU stays united and reduces dependencies; it warns that a rising number of EU-sceptical leaderships could dilute EU powers, obstruct co-operation and weaken soft power, creating openings for external actors.
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