European Manufacturers Face Growing Competition from China

China's export basket is increasingly mirroring that of Europe, but its demand for European goods is declining. According to a study by the European Central Bank (ECB), China is no longer content with just selling to Europe; it is now competing with European manufacturers in sectors where Europe had maintained a lead.

The ECB measured this shift using a similarity index, which compares the composition of sales rather than export volumes. Between 2019 and 2025, this proximity to China has increased in most European countries, with Germany standing out as an exception due to its highly specialized industry in machinery and transport equipment.

However, Europe is losing on both counts: its companies are facing increased competition from Chinese products, both at home and abroad, while their access to the Chinese market is shrinking. The EU's share of global exports is falling, particularly in sectors where China's presence has grown, such as machinery and transport equipment.

The study notes that this competition is not just a price war but is driven by productivity gains, technological advances, and a shift towards higher value-added production in China. Government support and relatively low Chinese production costs may also contribute to this competitiveness.