{"text":[[{"start":6.3,"text":"This article is an on-site version of the Free Lunch newsletter. Premium subscribers can sign up here to get the newsletter delivered every Thursday and Sunday. Standard subscribers can upgrade to Premium here, or explore all FT newsletters"}],[{"start":21.65,"text":"There’s no two ways about it — Europe is panicking about China. Berlin seems to be slowly adopting the view that there is a “China shock 2.0” about to devastate its industries. France’s economic planning authorities earlier this year issued an alarmist report based on projecting recent Chinese market share growth forward, and called for across-the-board tariffs or euro-renminbi devaluation on the order of 30 per cent. As if to hammer the point home, Volkswagen may have to cut 100,000 jobs and mothball four factories in Germany."}],[{"start":55.65,"text":"That is the backdrop for intense ongoing political efforts by the European Commission and EU member states to devise a new China strategy. But panic is no path to success. Today’s column is a plea for everyone to take a deep breath and look at some facts."}],[{"start":72.35,"text":"Hard cases make for bad law, it is said, but they can also make for bad policy. It is obviously tempting to take the VW news as the picture of the state of industry in Germany and Europe generally. But this temptation is ill-advised. As I wrote in a column on this topic in June, European leaders are in danger of chasing a phantom China threat."}],[{"start":95.6,"text":"A simple expression of EU leaders’ current frustration with China is “we buy ever more from them and they don’t buy anything from us”. In my column earlier this summer, I pointed out a problem with this argument. When it comes to cars — the totemic industry whose struggle often serves as synecdoche for a supposed general challenge — I reported that:"}],[{"start":115.8,"text":"Chinese imports into the EU have indeed increased, from 750,000 passenger cars in 2023 to just over a million in 2025, according to the manufacturers’ trade body. But that has displaced imports from elsewhere — the total number of cars shipped into the EU remained steady."}],[{"start":134.35,"text":"Imported Chinese cars, in other words, are outcompeting other cars from outside the EU — not the bloc’s own carmakers."}],[{"start":142.6,"text":"It turns out that this holds broadly across the EU economy. The analyst firm Gavekal has in the past year produced a striking series of research notes on the EU-China economic relationship, which provide a healthy corrective to the prevailing narratives. One example: like with cars, EU imports of all goods from China have soared — but, again like with cars, other imports have fallen to offset this."}],[{"start":167.75,"text":"As Gavekal’s Cedric Gemehl told me:"}],[{"start":170.5,"text":"To put the rise in the EU’s import volume from China into perspective: it is up 42% since December 2019, which compares with an increase in total EU import volume of just 4% over this five-year period."}],[{"start":185.5,"text":"I have reproduced Gemehl’s chart below. "}],[{"start":null,"text":"
"}],[{"start":188.4,"text":"Rather than an unsustainable flood of imports undercutting European industry, manufacturers face import penetration but from a changing composition of source countries: more from China, less from other traditional trading partners (especially the UK and US; Switzerland and Japan have also not kept up)."}],[{"start":206.5,"text":"The Gavekal notes highlight a couple of other important facts:"}],[{"start":210.9,"text":"The slight increase in overall import volumes leaves EU imports as a share of GDP the same as before the Covid-19 pandemic. In other words, no overall raised threat to EU producers’ domestic market."}],[{"start":223.9,"text":"What about export markets? Well, the EU’s exports are holding up well. So well, in fact, that the bloc’s overall trade surplus is robust once we look past the big fluctuations in energy trade this decade. (The EU’s trade surplus outside of China and the energy trade has risen significantly.)"}],[{"start":241.25,"text":"And EU exporters are enjoying pricing power: while volumes are stable (if a little down since before the pandemic), export unit values keep rising, the Gavekal research finds."}],[{"start":253.5,"text":"This is not the picture of a European industrial ecosystem facing a lethal competitiveness crisis. It looks more like one confronted with changing competitive challenges, yes, and being forced to update itself technologically and structurally — but one that is succeeding in shifting towards high-value-added production."}],[{"start":273.55,"text":"Fascinatingly enough, these general patterns are on display even in the sector that occasions perhaps more policy debate than any other: electric vehicles. From another of Gemehl’s Gavekal notes:"}],[{"start":285.7,"text":". . . contrary to media headlines, the European Union is a growing net exporter of EVs . . . The EU is both a major importer and exporter of EVs, and the latest data suggest that it is now exporting more units than it imports for the first time since the EV trade began to scale up . . . "}],[{"start":303.4,"text":"With this chart to go with it:"}],[{"start":null,"text":""}],[{"start":305.65,"text":"And as with other goods, the EU exports expensive goods while importing cheaper ones:"}],[{"start":313.04999999999995,"text":"Yet while EV trade volumes [in numbers of cars] are broadly balanced, the value distribution is not: EU export unit values are roughly double those of imports, a ratio that has remained stable as trade has scaled up."}],[{"start":328.15,"text":"VW may have a problem. Perhaps even Germany has a problem — although one with plenty of homegrown causes. But don’t plan European strategies from panic around single cases. Germany is bigger than VW and, crucially, Europe is bigger than Germany. Policy should be made accordingly."}],[{"start":345.84999999999997,"text":"Other readables"}],[{"start":347.34999999999997,"text":"● Attention aspiring writers under 35: the FT is reviving its Bracken Prize for Young Authors."}],[{"start":354.79999999999995,"text":"● How Europe would fight without US help."}],[{"start":358.04999999999995,"text":"● An outspoken Chinese economist who publicly doubted official GDP figures has died."}],[{"start":363.9,"text":"● In an interview with the FT, Ukraine’s president says the war will be decided by “the battle in the air”."}],[{"start":null,"text":"