The Apprentice Is Now The Master
Can Europe learn from China’s money?
Grüezi!
The debate about Chinese factories in Europe is stuck between naïve openness and fortress protectionism. But the real question is not whether Chinese investment can transfer capability – the East Asian record proves it can – but what China gets out of it.
The answer is ecosystem dominance. Europe learns to make batteries – using Chinese chemistry, Chinese equipment, Chinese process knowledge. Both sides gain.
But only if Europe builds the off-ramps while it’s learning.
1. The Sceptic and the Supplicant
There are two sides in the debate about Chinese industrial investment in Europe. Neither gets it right.
The first reckons that any Chinese factory on European soil is a Trojan horse – a “screwdriver plant” assembling imported parts and calling it manufacturing – hollowing out indigenous industry.
The second, favoured by governments desperate for investment, hopes that Chinese capital automatically means Chinese technology, and technology will mean capability. CATL, please build here, no questions asked.
Alicia García Herrero, writing in El Mundo in the week Spanish PM Pedro Sánchez visited Beijing, made the sceptics’ case. Chinese investment in Spain “doesn’t bring technology – or more precisely, the technology stays at home.” She called the relationship “surrender by protocol.”
China accounts for nearly three-quarters of Spain’s total trade deficit – something Sánchez raised with his hosts at Tsinghua.
But as Beijing publicly courted Madrid, the FT reported that it had also been quietly telling European shipping giants Maersk and MSC to abandon Panama Canal port concessions they had taken over after CK Hutchison was ejected.
China deals with Europe the way America does – country by country, firm by firm, preventing any collective leverage from forming.
Commerce and coercion go hand in hand.
But the sceptics’ case – that Chinese investment can never be a bridge to capability – doesn’t follow from the evidence. The historical record from East Asia strongly suggests that it can.
2. The Train That Took The Tech
The most successful tech transfer of the 21C is probably China’s high-speed rail programme. It deserves a close look because how it happened is more replicable than is usually assumed – and more instructive than a simple shrug that “China is authoritarian, Europe can’t do this.”
In 2004, China’s Rail Ministry launched tenders for 200 high-speed trains with one non-negotiable condition: foreign companies had to assemble the trains through local joint ventures and transfer key technologies. Alstom, Siemens, Bombardier and Kawasaki all bid.
The Ministry played them against one another – the classic monopsony buyer exploiting supplier competition – whilst simultaneously mobilising enormous domestic R&D.
The Ministry of Science and Technology committed nearly ¥10 billion. Twenty-five universities, 11 research institutes and 51 national laboratories were enrolled in a parallel innovation programme.
Six years after licensing the Japanese Shinkansen E2 bullet train design from Kawasaki, CRRC Sifang was producing trains with no Japanese input. By 2017, China had its own fully indigenous designs. From first technology import to export-ready capability took China 13 years.
Three things made this work. A single buyer with the political and commercial power to set terms. Competing foreign suppliers whose leverage was neutralised by the number of alternatives. And – most importantly – a massive parallel investment in absorptive capacity, so that Chinese engineers could understand, modify and ultimately replace foreign designs rather than merely assembling them.
The apprentice is now the master. The crucial reversal for Europe is that in this story, China was the learner. Europe would be borrowing from a playbook that was used, quite deliberately, to displace and disrupt European firms. But the mechanics are transferable even if the direction reverses.
The EU is collectively the world’s largest single market for electric vehicles. It has the purchasing power to act as a coordinated buyer.
It simply hasn’t organised that power into anything approaching leverage – partly because China’s bilateral strategy is specifically designed to prevent it.
3. Heat, Wind and Hydrogen
The doom narrative about European industrial decline ignores the sectors where Europe sustained its investment – and where the results match the money.
Heat pumps are the clearest case. Over 80 per cent of pumps installed in Europe are assembled there, according to last month’s figures from the European Heat Pump Association – against 10 per cent from China.
Europe has over 300 production sites, supports 433,000 jobs and has the capacity to produce 8 million units a year, more than three times current demand. Sales grew by 11 per cent across 16 European countries in 2025. This isn’t an industry under siege. It is an industry awaiting demand.
Wind energy is stronger but more exposed. European manufacturers held a 92 per cent share of the European market in 2024 and captured roughly 73 per cent of global installations outside China in 2023. The industry employs 370,000 people and maintains a net export surplus.
But industrial advantages can unravel. Siemens Gamesa and Vestas saw their combined Indian market share collapse from 45 per cent in 2019 as China’s Envision rose to over 40 per cent. Chinese manufacturers have not yet cracked the offshore engineering capabilities where European firms lead – but onshore, the threat is real.
In electrolysers Europe holds 28 per cent of international hydrogen patents and leads in PEM and solid oxide technology. The manufacturing paradigm isn’t yet locked in – which means Europe’s research advantage can still be converted into a future industrial position.
Where Europe kept up continuous investment and market presence, its industrial capability has endured. The merchants of gloom summon up the sectors where Europe stopped investing – like solar PV manufacturing and battery cell chemistry.
The conclusion? Don’t surrender the field – sustain and coordinate investment.
4. Advance From Dunkirk
Batteries are a critical test case – moderate absorptive capacity, eroding fast, outcome undetermined.
Northvolt went bankrupt owing $5.8 billion. In February 2026, Automotive Cells Company, the Stellantis-Mercedes-Total battery venture decided to permanently shelve plans for German and Italian gigafactories.
But Verkor inaugurated its Dunkirk gigafactory in December 2025 – on schedule, on budget, under the political patronage of Emmanuel Macron. Initial capacity: 16 GWh, with plans to reach 50 GWh by 2030.
By March 2026, it had completed commissioning ahead of schedule, with production lines fully optimised and serial production imminent. The first cells will power Renault’s Alpine A390 this year.
This is a European-owned battery plant that works. It was backed by France 2030, the most effective national industrial programme in Europe.
Meanwhile, two Chinese-European joint ventures offer early templates for conditioned investment. The Stellantis-CATL venture in Zaragoza – a 50-50 JV investing €4.1 billion to produce 50 GWh of LFP batteries – broke ground in November 2025, backed by over €300 million in EU funding. It’s next door to Stellantis’s existing vehicle plant, and right in the middle of a regional ecosystem of 300 automotive suppliers.
Italy meanwhile is in negotiations with Dongfeng – demanding 45 per cent local content, data localisation and European-sourced infotainment units.
These moves are early and far from perfect. The Zaragoza plant will initially rely on 2,000 Chinese construction workers; whether genuine process knowledge transfers to the 3,000 Spanish employees who follow is the question that matters.
But the conditions are getting tougher with each deal. And Chinese firms need European revenue.
5. The Android Play
If Chinese investment in European battery manufacturing only benefited Europe, Beijing would block it. If it only benefited China, Europe would refuse it.
The reason both sides are moving cautiously forward is that both gain – but the gains are asymmetric in ways that matter enormously for long-term autonomy.
Think of it as the Android model. Google didn’t mind Samsung getting good at making phones. Every Samsung phone runs Android. The more capable Samsung becomes, the more entrenched Android’s ecosystem dominance gets.
China is making the same play in batteries. If European gigafactories run on CATL chemistry, CATL equipment lines, and CATL process engineering – Europe can make the cells, but China will own the platform. CATL doesn’t need to keep technology at home if every factory in Europe is a node in its ecosystem.
And if Europe manufactures LFP batteries using Chinese processes, those become the European standard. Supply chains will work around Chinese upstream materials and precursor chemistry. European workforce skills will develop within a Chinese technological paradigm.
The more capable Europe becomes within the system, the harder it is to leave. Dependency through competence.
With 2 TWh of battery capacity and a domestic price war of extraordinary ferocity, Chinese manufacturers need export markets to survive. The US is closed – 100 per cent tariffs on EVs, 58 per cent on batteries.
Europe is the last high-margin, high-volume destination. Better to share some capability and sustain volumes than to hoard everything and watch margins collapse.
So the win-win is real. Europe gets manufacturing jobs and process knowledge. China gets ecosystem dominance and a geopolitical anchor on Asia’s western archipelago.
6. Building The Exits
Europe has three potential ways out.
First, next-generation chemistry. Europe’s battery R&D remains world-class. Solid-state batteries, sodium-ion cells and perovskite solar represent technology discontinuities where the industrial winners haven’t been decided – and where Europe’s research strength can translate into manufacturing position if the investment follows.
This is exactly the pattern that allowed Chinese EV makers to leapfrog Western incumbents: the electric vehicle discontinuity rendered decades of internal combustion expertise irrelevant.
Second, European-made equipment lines. The deepest lock-in in batteries isn’t chemistry – it’s the manufacturing equipment and process engineering that produces sub-10 per cent scrap rates. If every European gigafactory uses Chinese equipment and Chinese process software, the ecosystem dependency gets baked in.
Europe’s existing machinery sector – German and Italian precision engineering, in particular – has the capacity to develop competitive battery manufacturing equipment, but not without targeted investment and procurement preferences that treat equipment indigenisation as a strategic priority.
Third, upstream materials diversification. China controls dominant shares of lithium processing, cobalt refining and graphite production. No amount of downstream manufacturing capability produces autonomy if the raw material inputs remain a single point of failure.
Europe’s Critical Raw Materials Act provides a framework; but execution – as so often with European industrial policy – lags ambition.
The tools for all three are WTO-legal and available. Tiered state aid conditioned on R&D location and equipment sourcing. Anti-circumvention enforcement that extends duties to products assembled from predominantly imported components. Data localisation requirements that force local ICT partnerships.
The EU Battery Passport and Ecodesign regulations that can shape market access standards. What’s missing isn’t the instruments. It’s the collective will to deploy them in concert – and the coordination to prevent 27 member states from bidding against each other for the same Chinese factories on progressively worse terms.
7. Commitment Problems
Korea’s journey from technology importer to semiconductor leader took 25 to 30 years. Japan’s VLSI programme sat inside a two-decade strategy. China’s high-speed rail miracle – the fastest case on record – took 13 years with the world’s most powerful market leverage and a centralised state behind it.
The off-ramps Europe needs – next-generation chemistry, indigenous equipment, materials diversification – are decade-plus investments.
But Europe has solved this problem before. Airbus took 30 years from consortium formation to genuine commercial viability, sustained by treaty-level Franco-German commitment insulated from normal budget politics. France 2030 is structured to survive changes of government – and Verkor’s Dunkirk gigafactory is the proof that it can deliver.
These aren’t accidents. They’re institutional designs that solve the time-horizon problem by putting industrial strategy beyond the reach of the electoral cycle.
The bridge strategy – welcoming Chinese investment on conditions that build indigenous capability while constructing the off-ramps that prevent ecosystem lock-in – is the right approach. It can be defended on its own terms, not just as a lesser evil. But it only works with a twenty-year commitment.
And the hardest part isn’t designing the right conditions for Chinese investment or identifying the right off-ramps from ecosystem dependency.
It is building political institutions that will still be honouring those conditions in Year Fifteen of a programme whose benefits won’t appear until Year Twenty-Five.
Thanks for reading!
Best,
Adrian