Learning from China to compete with China
“Beijing’s current growth model envisages maximizing manufacturing exports and keeping higher value-added production and technology onshore. Offshore investment is tolerated to circumvent tariff barriers. But Beijing has made clear that its preference is for foreign investments to focus on final assembly. Export controls have recently been proposed to limit the creation of complete battery supply chains outside China. With youth unemployment stubbornly high and a sensitive issue politically, Beijing has no incentive to repeat what it sees as the mistakes of the West in offshoring manufacturing jobs.”
“Concurrently, Brussels is wielding an array of defensive trade tools to shape Chinese investment. One prominent EU Commission official plainly warned that the EU is ‘not interested in investments that are simple assembly operations without added value and without technology transfer’. The European Commission’s investigation into BYD’s EV investment in Hungary under the Foreign Subsidies Regulation (FSR) was widely understood to be a shot across the bow of Beijing’s preferred final assembly model.”
“Brussels has also proposed through its March 2025 Automotive Action Plan to institute local content requirements for EV batteries, as well as making approval of Chinese automotive investments contingent on technology transfer. Dangling access to a vast internal market to force technology transfer is a tactic that would be intimately familiar to Chinese policymakers of years past.”