China’s overcapacity is not a bilateral issue; it is a global one
The European Union is on the brink of a full-blown trade confrontation with China. What Brussels calls “China Shock 2.0” – the flood of subsidised exports in electric vehicles, solar panels, batteries, steel and chemicals – is no longer a theoretical risk. It is here.
After the College of Commissioners’ closed-door discussion on China on 29 May, one thing is clear: the threat of Chinese retaliation will not deter the executive from acting.
The EU is arming itself with a new arsenal of autonomous trade instruments. The centrepiece is the so-called “overcapacity instrument”, a cross-sector safeguard designed to restrict Chinese access to EU markets when Beijing’s industrial overcapacity threatens strategic European sectors. It would sit alongside the Anti-Coercion Instrument (ACI), which the Commission has approved but still needs to go through the Council, and tightened cybersecurity rules that could further limit Chinese suppliers in critical digital infrastructure.
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