China\u2019s economic power is putting increasing pressure on European and German industry. This is not only an economic challenge; it is also a security risk. To mitigate this risk, we need more stress tests, a trade defence club and regular crisis simulations.<\/p>\n
Europe is facing the so-called China shock. This is created by state-supported imports that increasingly compete technologically with key European industries, such as mechanical engineering and the automotive sector. If industrial capacities are lost as a result, Europe risks not only declining competitiveness, but a reduced ability to produce defence goods in times of crisis, strengthen supply-chain resilience, and sustain itself long-term.<\/p>\n
Yet the security dimension of the China shock remains under-discussed. The debate still focuses primarily on market distortions, subsidies, and industrial overcapacity. But the China shock also affects industries whose know-how, technologies, and supply chains are essential to Europe\u2019s defence capabilities. The erosion of the industrial base is not only a threat to Europe\u2019s competitiveness. It is also a risk to its security.<\/p>\n
The China shock is already well underway, with little sign of improvement. China\u2019s 15th Five-Year Plan (2026\u20132030) places a clear emphasis on industrial production and technological self-sufficiency.<\/p>\n
Beijing aims to maintain the full industrial spectrum at home \u2013 from textiles and chemicals to machinery \u2013 while expanding China\u2019s position in global supply chains in ever more sophisticated segments. This strategy includes the targeted promotion of future-oriented sectors, such as quantum technologies and embodied artificial intelligence.<\/p>\n
Supply chains that are more tightly controlled by China and more resilient from a Chinese perspective are an explicit goal. The Chinese government is focused on comprehensive national security and national defence \u2013 and is promoting military-civil fusion in industrial manufacturing, as well as research and development.<\/p>\n
Against this backdrop, the question of which segments of value creation will remain in Germany and Europe over the long term is becoming a major challenge, with far-reaching implications for industrial capacities and, ultimately, for European defence capabilities.<\/p>\n
Russia\u2019s 2022 full-scale invasion of Ukraine has dramatically increased the importance of European defence capabilities. Vladimir Putin\u2019s goal is to restore Russian imperial power, including the European security order that existed before NATO\u2019s 1997 eastern enlargement. This ambition directly concerns nearby EU member states, such as Poland and the Baltic countries. Building credible European defence and deterrence capabilities is essential for the EU.<\/p>\n
A strong industrial base is critical to reducing vulnerabilities in critical sectors and ensuring defence capability in times of conflict. Key industries such as machine tools, automotive, shipbuilding and electronics come with production expertise, materials and components that could, under certain conditions, be used in the production of defence goods.<\/p>\n
Equally important is the ability to adapt and expand production capacities rapidly in times of crisis. This requires companies capable of investing, developing a skilled workforce, and building resilient supply chains, including reliable access to intermediate goods and raw materials.<\/p>\n
Ukraine provides an important example. The country has demonstrated an ability to mobilise industrial resources and redirect civilian production toward defence goods.<\/p>\n
A strong industrial base is essential for the EU\u2019s long-term defence capability.<\/p>\n
The China shock is not only a threat to European competitiveness. It is a security policy risk for Europe \u2013 and it requires targeted policy responses.<\/p>\n
First, the European Commission and EU member states should consider introducing a China shock stress test for defence-relevant industries. What capacities are strategically critical? Where is displacement by Chinese competitors most likely? What dependencies could become dangerous in a crisis? Such assessments should be updated regularly and closely linked to industrial and security strategies to enable early countermeasures.<\/p>\n
Second, the EU and its member states should promote a trade-defence club of rules-based partners willing to counter systematic distortions in international trade. While this would not eliminate the China shock, it could help mitigate its effects and preserve critical industrial capacities. An important requirement would be the development of common instruments and criteria to enable coordinated and rapid responses.<\/p>\n
Third, the European Commission, member states, companies and industry associations should conduct regular simulations to model how supply chains, production systems and procurement structures would perform during a severe crisis. The findings of such stress tests should be systematically evaluated and integrated into political planning and decision-making processes, including procurement strategies, emergency planning and industrial-policy priorities.<\/p>\n
For too long, Europe believed that security could simply be purchased whenever needed. But the war in Ukraine demonstrates that in times of crisis, security depends not only on financial resources, but on what a country is able to produce, repair and scale reliably itself through the interaction of state support, private sector initiatives and agile institutional structures.<\/p>\n
Defence capability does not depend solely on the defence industry. It depends on the broader industrial base. This makes it clear that a European industrial policy that protects and strengthens this industrial foundation is also security policy.<\/p>\n