China’s growing vulnerabilities pose fresh risks for Europe: Report

New Delhi, July 18 (IANS) China’s mounting economic vulnerabilities are creating fresh strategic and economic risks for Europe, with Beijing becoming more assertive at home and abroad despite slowing growth, a report has said.

According to an analysis by The Diplomat, Europe has long assumed China’s rise would continue uninterrupted and eventually lead to political liberalisation.

However, with those expectations proving misplaced, the European Union needs to adopt a more pragmatic and interest-driven approach towards Beijing, it said.

China remains a global industrial powerhouse, technology innovator and geopolitical force, but is increasingly weighed down by structural challenges, including an ageing population, a shrinking workforce, a prolonged property sector crisis, weak domestic consumption, high debt and slowing economic growth.

These pressures have prompted Chinese households to save rather than spend, resulting in weak domestic demand and encouraging Chinese firms to expand aggressively into overseas markets, according to the report.

It warned that excess industrial capacity, supported by substantial state subsidies has enabled Chinese companies to engage in aggressive pricing, posing a growing challenge to the competitiveness of manufacturers in Europe and other markets.

The report also flagged that China’s expanding dominance in strategic industries could deepen global dependence on Chinese technology, increasing Europe’s exposure to political and economic pressure.

Rather than pursuing full economic decoupling, which it described as neither practical nor desirable, the report called on the European Union to diversify supply chains, strengthen its technological leadership and use market access, investment and technological cooperation as bargaining tools in negotiations with Beijing.

It also urged Brussels to adopt stronger trade defence mechanisms, enhance cooperation with partners across the Global South and seek concrete concessions from China on issues including export surges, shipments of dual-use goods to Russia and stricter localisation requirements for Chinese investments in Europe.

Failing to respond could accelerate the erosion of Europe’s industrial base and weaken confidence in the ability of European democracies to safeguard their long-term economic and strategic interests, according to the report.

–IANS

ag/