Europe’s De-Risking Push Increases China Exposure

By the Editorial Team · Friday, July 3, 2026

European companies are increasing their onshoring activities in China despite efforts to diversify supply chains, with 56 percent of surveyed firms expanding operations there due to cost advantages. This trend complicates Europe's strategy to reduce economic dependence on China amid rising geopolitical tensions and highlights the challenge of balancing economic efficiency with political goals.

European efforts to reduce reliance on China may be inadvertently deepening their economic ties to the country, according to Jens Eskelund, president of the European Union Chamber of Commerce in China. Speaking at an economics conference in Berlin on Wednesday, Eskelund said that despite intentions to diversify supply chains, many European firms are embedding themselves more deeply within China's industrial ecosystem.

Eskelund’s remarks followed recent trade talks in Brussels between China’s Commerce Minister Wang Wentao and EU Trade Commissioner Maros Sefcovic. Citing a survey conducted among nearly 300 chamber members earlier this year, he noted that 56 percent of respondents reported increasing their onshoring activities in China, while only 7 percent indicated greater offshoring away from Chinese supply networks. This trend suggests a shift contrary to Europe's broader strategy to mitigate economic risks linked to overdependence on China.

The driver behind this increasing integration, Eskelund explained, is primarily cost competitiveness. Chinese supply chains remain highly efficient and affordable, making them critical for European companies seeking to produce quality goods at competitive prices. Juergen Matthes of the German Economic Institute underscored this point by estimating that the Chinese yuan is undervalued by 20 to 30 percent against the euro, creating a structural price advantage for Chinese exporters.

Eskelund also highlighted Beijing’s growing confidence in advancing its strategic interests, referencing a notion frequently used in Chinese discourse known as “escalation dominance.” This concept reflects China’s capacity to impose higher costs in confrontations than its opponents are willing or able to tolerate, which affects negotiations and policy decisions.

The findings illustrate the complex realities facing Europe as it navigates economic relationships with China. Although political and strategic considerations have prompted calls to reduce dependency, the operational realities of global supply chains and cost pressures continue to anchor many European companies within the Chinese market and production system. This dynamic poses challenges for policymakers seeking to balance economic interests with geopolitical objectives.

This article was reported by synthesizing coverage from multiple independent news outlets to present a balanced, unbiased account. Read about our editorial standards. Spotted an error? Let us know.