Is Europe walking into a new China shock? Sam Goodman — Senior Policy Director at the China Strategic Risks Institute […]
Is Europe walking into a new China shock? Sam Goodman — Senior Policy Director at the China Strategic Risks Institute joins Ricardo Silvestre to dissect the EU–China relationship at a moment of real turbulence. From Middle East fallout and the Strait of Hormuz, to trillion-dollar trade imbalances, Merz’s first Beijing visit, Macron’s tariff push, and the Commission’s economic security agenda, this conversation maps the chessboard that will define Europe’s next decade.
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Ricardo: I’m here with Sam Goodman. Sam, thank you so much for coming to the podcast.
Sam: Oh, my pleasure. Thanks so much for having me.
Ricardo: Sam, let’s dive right into it. We have many things to talk about, but one of them is very topical at the moment we record this — the Iran situation and the Middle East turmoil. From your experience, what could be the impact? What direction could EU–China relations take, particularly regarding economic security?
Sam: It’s worth pointing out that while we’re recording this podcast, there’s news overnight that the fighting might be continuing in the Strait of Hormuz. The Iranians have also launched a number of drones at the UAE that have been shot down. Right now, this ceasefire is very tenuous at best, and Europe is being affected directly. There are reports that we are going to have air fuel rationed this summer. It will really impact European holidaymakers, but it will also be followed by a steep increase of inflation in the fall — huge increases in energy prices and food prices. For many Europeans, we’ve been here before. We were here with COVID-19 and the pandemic. We were here with Russia and Ukraine. This is the third big geopolitical shock we’ve had, and it has real ramifications for the cost of living of ordinary European citizens across the EU. That’s the context we have to frame this in, first of all. The second piece of context is that EU–China relations are pretty frosty at the moment, and have been for some time. Part of the reason for that frostiness is the huge trade imbalance between the EU and China. China today is importing a lot less from the EU and exporting a huge amount, because its manufacturing output is essentially producing an overcapacity where it has to export to grow. Many of these products are being dumped in Europe — subsidised products, companies that receive huge subsidies from the Chinese state. It’s gotten to a point where that’s no longer sustainable for European policymakers, and that’s caused some of the unease in the relationship. What does it mean for China more broadly? A lot of analysts would say China is in a pretty strong position compared to other countries, because they stockpile energy. They also have domestic production of energy — oil, gas, and of course green energy. So China could be viewed as a solution to some of these problems. However, within the first couple of days of the conflict breaking out in the Middle East, the first thing China did was restrict its energy exports so it could maintain domestic supply. So for the immediate part of it, the Chinese are not actually being that helpful. Look at what’s happening in Asia right now — about a billion people are having energy rationing, and the Chinese are not necessarily stepping up to help them. So that’s a really important point: what is the role China is playing to mitigate the worst effects of this conflict? Don’t forget either that Beijing is a staunch supporter of the regime in Tehran. Without Beijing’s support, it’s very hard to see how Tehran would be able to fight on — both materially, having the arms and the infrastructure to do so, and politically. Europeans are aware of this. We’ve seen this dynamic play out in Ukraine, where the NATO head has said that China is the chief enabler of Russia’s war in Ukraine. So this isn’t new. That’s the other factor for China worth putting into context. I think it’s led to an interesting discussion in Europe on two points. One is this question of de-risking and national resilience. It was very clear in the Draghi report, with recommendations about how the EU could build up its resilience from these shocks. There’s talk now of the EU Industrial Accelerator Act, which we’ll discuss. And the second is the question of green energy and green technology. Does Europe now need to follow the example of China — increasing solar, increasing wind, getting more people to drive electric vehicles? Is this actually the way to protect Europe in the future from any conflicts in the Middle East? A lot of people are thinking that maybe China could be the trading partner that allows European countries to import this technology, because China dominates the EV supply chain now. They also dominate the solar supply chain — between 92 and 93 per cent of the polysilicon that goes into solar panels comes from China. So you can’t really install solar panels at any meaningful scale without the Chinese. That’s a big question as well. Economically, China’s economy has been suffering for a while. It has high youth unemployment, and its housing sector is still very much in recession. So this conflict isn’t good for China either. Some of the narratives about this being a good thing for China — China being able to take advantage of it — maybe, but it’s actually a lot more complicated than that. And it’s obviously very complicated for the EU at a time when it’s trying to build up its own national resilience and de-risk some of its supply chains away from China. But at the same time, there are people within the EU — the Spanish Prime Minister Pedro Sánchez, for example — who are saying we should be trading more with China, because China has this green technology that means we can be less reliant on oil and gas from the Middle East.
Ricardo: Sam, let me interrupt you here for a follow-up, because this is something I’ve been thinking about, and you’re the right person to ask. Can we, in a way, interpret this moment as a crossroads for China? I imagine they could still play the game you just described, or they could get ambitious and try to replace the US on the world stage — as the superpower diplomatically, politically, economically, and even militarily. Or do you think they will maintain mostly the position they have, which is very centred, letting things happen and then watching with their own millennial strategy? Do you think that temptation is there, or is the system too hard to move in that direction?
Sam: What you’re talking about is very much the pull-and-push dynamic at the heart of the politics within the Politburo in Beijing. Some people speculate that Xi Jinping — the chairman of the Communist Party, who the West talks about as a president, but who isn’t elected and has essentially made himself ruler for life — wants to be more ambitious, particularly about reunifying with or taking military action against Taiwan. But you’re right: there is an opportunity for China to step into the void and deepen its relationships with partners that have been affected economically by what’s going on in the Middle East. China is now the number one trading partner of the vast majority of countries in the world, particularly in the Global South. But there is a natural caution within the Chinese Communist Party. You’re correct: they think of politics in centuries while we think about it in weeks and years. Many in the Politburo would say, actually, we’re not in a rush. Let the Americans do what they want. If they implode, they implode. We don’t need to get involved with that. As I said in my previous answer, the Chinese also have to think about their own economic position. It’s not just a tick next to China that they’re going to do very well out of this conflict — there are huge risks for them. There are some in Beijing who perceive a concerted strategy by the USA to get rid of their closest allies. We saw this with the capture of Nicolás Maduro in Venezuela, where now you have a regime more friendly to the US and US interests. Some people put what’s happening with Iran in the same category. That makes people in Beijing very nervous, because these are some of their closest partners — and useful proxies. They want to keep the Americans pinned down in other regions of the world militarily; they need proxies that do that. It does make Beijing a bit more vulnerable if the US are clearing the table strategically so they can spend more time focusing on the Indo-Pacific. To your question: it’s difficult to tell, sat in Brussels or Lisbon or London, what Xi Jinping is personally thinking about all of this. But with some certainty, we can say it’s a mixture of both — a level of caution, and also some around him saying we should be doing more to take advantage of the situation.
Ricardo: I imagine they are aware of the need — particularly from the European Union, but mostly across the Western world — for stability. Market stability, political stability, diplomatic stability. With all the craziness we see from the Trump administration, naturally people will start turning more toward China, even if there’s resistance to that. As you mentioned, it’s not truly a democratic system. It doesn’t account for freedom of the press. There’s the Taiwan situation, the Hong Kong situation. But markets like stability, and they like to know their partners won’t change the world order just because they want to. That’s something we’ll keep following. Did you want to jump in here?
Sam: The stability point is really interesting. And sometimes it’s a bit of a misnomer when you’re thinking about the PRC, because there are many actions the PRC has taken in the last several years that are the opposite of creating stability. You alluded to one — Hong Kong, which is the only global financial centre in Asia. Some of what it’s done in Hong Kong is very disruptive to the flow of free trade and capital: the jailing of pro-democracy lawmakers, but also the dismantling of a free press that you would need to run a financial centre of that scale. There are other things geopolitically China is doing right now that are disruptive and don’t help a stable order — whether that’s some of what’s going on in the South China Sea with the Philippines and other countries where there are huge questions about territory, or the question of Taiwan. This would be ruinous for Europe if China were to take some sort of action against Taiwan. A huge amount of global trade goes through the Taiwan Strait. TSMC, the Taiwanese semiconductor company, produces about 93 per cent of the advanced semiconductor chips we need for AI and all future technology. There are huge risks at play if Xi Jinping were to go on this military adventure. So we do need to be cautious when thinking about the idea that China could be some sort of stable pole — particularly, as you say, when you have an autocratic government in power that thinks very much about ideology and prioritising narrow ideological claims, essentially keeping the party in power versus economic stability.
Ricardo: Something that may create some thought in Beijing is the visit of European leaders like Chancellor Merz and President Macron. There seems to be a little bit of alignment between these capitals and Beijing, but there’s also the Brussels aspect. Tell us a little bit how this chess is being played right now.
Sam: Sure. Maybe I’ll break it down and start with President Macron and the position of the French. President Macron has been a regular visitor to Beijing for many years — I think he tries to go at least once a year bilaterally. But the French position has been for some time that China needs to rebalance its trade with Europe. After Macron’s last visit in December 2025, he wrote a piece in the Financial Times where he publicly called out the trade imbalances between Europe and China, which he pointed out had reached a trillion dollars. He said they urgently needed to be rebalanced, and that if they weren’t, France would advocate for the EU taking more protectionist measures — meaning more tariffs on Chinese goods. What followed was a report from an internal French government think tank saying their position should be 30 per cent tariffs on all Chinese goods. That was quite provocative in some circles. It’s worth noting that on electric vehicle tariffs, the French were the ones who advocated for tariffs on Chinese EVs. They were then singled out by Beijing with countermeasures on the French brandy industry. So the French are very forward-leaning on prioritising economic security and protectionism and trying to rebalance the relationship. But at the same time, they have many trade agreements with China. They partner with the Chinese — still in space, which some people struggle to believe. They sell a lot of high-end luxury goods in China, and they partner on civil nuclear and other areas, like Airbus planes. So the French are trying to trade more with China while also prioritising the economic security of Europe. They kind of have a “cake-ist” approach — if you believe in cake-ism, they want it all. Turning to the EU and the Commission, it has been a difficult relationship, particularly with this set of commissioners, who do care very deeply about economic security and take the view that one of the big problems of the day is the fact that China is enabling Russia’s war in Ukraine. Think about the exchange between High Representative Kallas and Chinese Foreign Minister Wang Yi last year when they met. Kallas drew an admission out of Wang Yi: he said that China can’t afford for Russia to lose the war in Ukraine. That was quite astonishing to read in the paper — though it’s something we’d all kind of known. The Chinese were furious about that leak, and it certainly didn’t help the relationship. The Commission has been driving this economic security agenda. If you look at the raft of EU legislation we’ve seen in recent years — the Chips Act, the Critical Raw Materials Act, the Net Zero Industry Act — they’ve all originated in the Commission and the Commission President’s office, and then been put to the member states, who in many cases water them down. Last year was the 50th anniversary of EU–China relations, and there was an expectation that Xi Jinping might come to Brussels. It’s what the Commission wanted. It’s what a lot of EU member states wanted. The timing of the anniversary would have been perfect because it was when the first round of US tariffs landed, and many in Europe were talking about getting closer to China in response. But Xi Jinping was not interested in travelling to Brussels or to Europe. Instead, he has welcomed a steady flow of European leaders the other way, coming to see him in Beijing. In the end, a couple of EU officials went to Beijing for the anniversary, including former EU Commissioner Michel Barnier, who gave quite a telling speech on economic security. He said it was also in China’s interest to address these trade imbalances, because it wasn’t just an economic problem between the EU and China. If these trade imbalances and the overcapacity continued, he said, eventually you would have populism spread across Europe, and you’d have more populist governments who would close off trade with China. It would become self-defeating in its very nature. That message was delivered quite clearly. I don’t know if it was heard, but it was delivered quite clearly. The other issue with the EU Commission is the new EU Cyber Security Act. The recent news is that the EU has said it’s banning Chinese-made inverters that go in solar panels and wind turbines from the EU, and pulling funding from Chinese companies that might receive EU funding. There was a story a couple of days ago that the EU had blocked funding to Chinese telecoms company Huawei and wouldn’t allow funding for their inverters. So this has again created some difficulty in the relationship. The other sticking point is the EU Industrial Accelerator Act, which the Commission — along with the French, it is believed — is proposing. The idea is that we should have provisions that favour European products, that we buy European products to help European industry and ensure EU supply chains. The Chinese have come out very aggressively against it. They’ve said that if the EU Industrial Accelerator goes ahead, they will implement countermeasures. That’s interesting, because this is an industrial policy that focuses on the EU. But China is not seeing it as a domestic industrial policy for Europe — it’s seeing it as a trade measure that requires a counter trade measure. The irony is not lost on me, and I’m sure it won’t be lost on you: these are the industrial policies China has already adopted. We are really talking about reciprocity. For a European company to enter China’s market, they have to do so on China’s terms. We’ve seen that with the European auto industry. When they came into China in the early 2000s, they had to set up joint ventures with Chinese companies that were majority-owned by the Chinese company. They were forced to transfer technology to the Chinese company and to localise their supply chains in China. Now China has some of the best automotives in the world — and that’s not a coincidence. So for Europe to propose similar terms to China, and then for the Chinese to react this way, is deeply ironic. Turning to the third player in all of this — Germany. They have a new chancellor, Chancellor Merz, for about a year and a half (correct me if I’m wrong). He went to China for his first visit, I think about a month and a half or six weeks ago — I’d have to check. It was a big, big moment, because Germany really is at the epicentre of the economic difficulties the EU is facing with China. Germany accounts for about two-thirds of European investment into China. It’s German companies — your Volkswagens, your chemical companies. Germany has been facing huge de-industrialisation as China dumps its manufacturing goods in Europe and runs this huge overcapacity. Rhodium estimates Germany is losing about 10,000 manufacturing jobs a month, which is significant. Chancellor Merz doesn’t really know how to deal with it. What has changed is the language coming out of the German government. If you look at the traffic-light coalition under Olaf Scholz, they were very reluctant to talk about trade issues with China, particularly negative ones. With this government, you’ve seen more willingness to be frank about it. But you and I could argue that the reason they’re being frank is that the figures no longer make it possible for them not to be. There was a big question before Merz went to Beijing about how he would raise the issue that China is essentially forcibly de-industrialising German manufacturing — and that this is a big problem for Germany, and by extension a big problem for Europe, because many of these German companies have supply chains across Europe. He did mention it, and he took a trade delegation with him. He also curiously mentioned the idea that there should be some sort of free trade agreement between Europe and China that might solve some of these problems. For Germany, being at the economic forefront of all this, it’s interesting to see these mixed views coming out of Berlin and still this inability to act. The big question is where Germany will fall, because if Berlin decides to take a stronger position on economic security, suddenly you may have alignment with Paris and the Commission in Brussels. As history has shown, when these three partners work together, you shape a coherent EU policy. That’s something to watch. We could be sat here by the end of the year in a completely different world, where actually the EU has a coherent policy on China for the first time in a long time, with economic security at the heart of it — and with ramifications for all other member states, like Hungary, Portugal, and Slovakia.
Ricardo: Sam, that is something I’ll bring you back on the podcast to talk about. But with a couple more minutes of your time, tell us a little more about the work that the China Strategic Risks Institute does, and where can people follow you guys and follow you online.
Sam: Sure. We’re on LinkedIn and Twitter — I’m on LinkedIn — and we have a website. Our work is divided into three. We look at questions of economic security with a focus on the green technology supply chain. I’ve written a lot about electric vehicles over the last two years. We look at the People’s Liberation Army’s grey-zone tactics against Taiwan, which includes looking at the disruption of undersea cables. Many of your listeners will be aware of the sabotage of undersea cables here in Europe, and how this is very similar to what’s taking place in the Taiwan Strait. We’re starting to see a bit of coordination between Russia and China on this front, and it’s an area we’re very interested in as an institute. We also look at the expanding legal architecture China is putting in place — these extraterritorial laws, as it were, that apply to citizens and businesses all over the world, from the National Security Law to the anti-secession law and the impact they’re having on European businesses. Those are the three buckets we focus on. We’re based in the UK, but we work heavily in Europe and are regularly in many European capitals. I actually have a report launch in Brussels looking at the strategic leverage Europe has in regard to China, really trying to get into the weeds of some of these supply chains. Where are the parts of China’s economy that still rely on European companies? And is this an area where Europe should be leveraging these dependencies to get more balance in the relationship?
Ricardo: I’m going to put all the links in the podcast show notes — not only for the work that Sam’s been doing, but also the institute. And then you’re going to give me some of your literature so I can add it for people who want to know a little more. I’ve been talking with Sam Goodman. He’s the Senior Policy Director at the China Strategic Risks Institute. Sam, this was very illuminating, and it was a delight to have you on the podcast. Please come back soon.
Sam: I would love to. Thanks so much for having me.