China plays an extremely central and asymmetrical role in European supply chains, acting as the European Union's (EU's) largest partner for imports of goods.

This centrality creates significant economic dependencies, particularly for strategic technologies and critical raw materials, which in turn profoundly shapes elite geopolitical decisions in Europe, driving a complex strategy of "de-risking" rather than full "decoupling."

The Extent of China's Centrality in European Supply Chains

The sheer volume of trade and the nature of the goods imported underscore China's critical position.

Trade Dominance and Manufactured Goods

China is consistently the EU's largest partner for imports of goods (21.3% in 2024), while being the third-largest for EU exports (8.3%). This persistent imbalance results in a massive trade deficit—which peaked at a record €397.3 billion in 2022 and remained very high at over €300 billion in 2024.

European imports from China are overwhelmingly concentrated in manufactured goods (around 97% of total imports in 2024), particularly:

• Machinery and Vehicles: Accounting for over half of manufactured imports (55%). This includes a vast range of components and final products essential to European industries.

• Other Manufactured Goods: Making up a significant 34%.

• Electronics: The EU and the US have both become more dependent on imports from China for electronics over the last two decades.

This deep integration means that disruptions in China's production—whether due to natural disasters, domestic policy changes (like the former "zero-Covid" policy), or geopolitical tensions—have immediate and severe ripple effects across European economies, impacting everything from car manufacturing in Germany to consumer electronics sales across the bloc.

Critical Raw Materials (CRMs) and Strategic Dependencies

The most politically and strategically acute dependency lies in critical raw materials (CRMs) and the green and digital technologies they enable. Europe’s ambitious Green Deal and digital transition are effectively dependent on China's near-monopolies in key areas:

• Rare Earth Elements (REEs): The EU is nearly 99% dependent on China for its supply of the 17 rare earth elements, which are vital for permanent magnets used in electric vehicle motors, wind turbines, and defense systems. China also controls around 90% of the global market for essential raw materials used in downstream products like permanent magnets.

• Processing Dominance: China's dominance extends beyond mining to the high-value processing and refining stages. For instance, Europe is still almost entirely dependent on China for refining rare earths, and a high percentage of its supply of materials like gallium and germanium (which China has previously placed under export controls).

• Green Technologies: The EU relies on China for a massive share of its supply of net-zero technologies, including solar panels, solar inverters, and battery components. China's overcapacity in these sectors has even led to concerns about "dumping" in the European market, threatening nascent European industries.

This level of dependency creates a structural asymmetry of leverage, where China holds a significant degree of economic coercion power over Europe, as demonstrated by past export restrictions on CRMs.

The Geopolitical Consequence: Shaping Elite Decisions

The recognition of this deep and asymmetrical supply chain centrality has forced a fundamental shift in European elite geopolitical decision-making, moving away from a purely economic "partner" framework toward one that explicitly acknowledges China as a "systemic rival" and a "strategic competitor."

1. The "De-Risking" Strategy

The dominant geopolitical response from the EU is "de-risking," a term explicitly used to distinguish its approach from the "decoupling" advocated by some in the US.

• Diversification, not Isolation: De-risking means reducing high dependencies and vulnerabilities on a single country, mainly China, while not completely abandoning trade and engagement. European leaders realize that full decoupling would be economically ruinous, given the depth of integration.

• Building Resilience: The core of the strategy is to build resilience in essential areas. This involves:

  • Onshoring/Nearshoring: Incentivizing the return of some strategic manufacturing to the EU or reliable partners.

  • Partner Diversification: Actively seeking out reliable suppliers in other regions, for example, through strategic partnerships with countries in Africa and South America for CRMs.

  • Stockpiling: Developing strategic reserves of critical materials to guard against sudden supply shocks.

2. Legislative and Policy Instruments

Elite political decisions have translated into a wave of new, powerful EU legislation and policies designed to address supply chain vulnerabilities:

• The Critical Raw Materials Act (CRMA): This Act sets ambitious targets for EU self-sufficiency by 2030, aiming to extract at least 10%, process at least 40%, and recycle at least 25% of the EU's annual strategic raw material consumption within the EU. Crucially, it also sets an import ceiling: no more than 65% of a strategic raw material should come from a single third country.

• The European Chips Act: Designed to increase Europe's market share in global semiconductor production to 20% by 2030, reducing reliance on Asian producers, including China.

• The Anti-Coercion Instrument (ACI): This new legal tool gives the EU the power to impose trade and investment restrictions on a third country if it attempts to use economic coercion against the EU or its Member States. This is a direct geopolitical response to the perceived risk of China weaponizing its supply chain centrality.

• Outbound Investment Screening: The EU is discussing new mechanisms to screen and potentially restrict European investments in foreign countries, particularly China, to prevent "leakage" of sensitive technologies that could aid China’s military modernization (civil-military fusion).

3. Intra-European Geopolitical Fissures

China's centrality also shapes elite decisions by exposing and exacerbating fissures within the EU. While all members agree on the "systemic rival" designation, their individual dependencies vary greatly:

• Germany's Industrial Exposure: Germany, with its massive, export-oriented automotive and machinery sectors, has a disproportionately high reliance on the Chinese market, making its government more cautious about aggressive anti-China policies.

• Smaller States’ Vulnerability: Smaller EU members often lack the negotiating leverage of the bloc as a whole, making them more susceptible to bilateral pressure.

• Southern European Investment: China's investment in critical infrastructure, such as ports in Greece and elsewhere, creates further complex dependencies and divergent national policy instincts.

Elite decision-making is thus a continuous attempt to unify a common EU approach that balances the economic interests of members most exposed to China (like Germany) with the geopolitical imperative of reducing strategic risks for the entire bloc.

In essence, China's central role as both a massive consumer market and a near-monopoly supplier of strategic inputs has transformed European foreign policy. It has moved the conversation from simple free trade to one dominated by economic security, strategic autonomy, and the necessity of leveraging trade policy as a geopolitical tool against the threat of economic coercion. The challenge for Europe's elite remains the difficult and costly task of structurally reducing dependencies without triggering a destabilizing economic rupture.