View / Europe is debating the terms of its industrial surrender

It can be easy to forget that, until recently, modern China had precious little technology of its own.

Living in Beijing in the early 1990s, excited crowds would gather around my made-in-Taiwan mountain bike, gasping at the apparently fancy features unavailable on Chinese-built Flying Pigeons (like, for example, gear cogs). The city’s wide boulevards were so devoid of cars that on hot summer nights, residents would set out chairs and card tables in the traffic lanes to catch the breeze from an occasional passing vehicle.

Today, Western politicians complain that China achieved its meteoric technological rise through “forced technology transfer.” In reality, the handover was mostly voluntary.

US and European CEOs willingly traded knowhow for the promise of market access. In the early years, they used the Chinese market as a dumping ground for obsolete technology. My first mobile phone — for which I had to submit a written application to the Shanghai branch of the Ministry of Posts and Telecommunications as part of a lottery system — was a Motorola “brick,” so heavy I needed a backpack to carry it around.

Later, Western CEOs passed along vast amounts of cutting-edge technology they couldn’t deploy elsewhere in the world — like high-speed trains — or which, for strategic reasons, didn’t fit into their global portfolios: General Electric sold its entire avionics division to state-owned AVIC, which later built the C919 airliner that now competes with Boeing and Airbus.

Indeed, Western multinationals happily seeded entire industries in China. In Apple in China, the Financial Times reporter Patrick McGee describes how the US firm’s advanced manufacturing supply chain birthed China’s world-beating consumer electronics sector. Tesla played a similar role in EVs.

China outplayed them all. It did so, in the first instance, by negotiating the wholesale transfer of Western industrial blueprints on astonishingly generous terms, then by absorbing the knowledge, and now by rapidly iterating on Western inventions — all in the span of a single generation.

In a sense, Western multinationals unwittingly created their chief global competitors, along with the conditions for their own demise.

That’s the central dilemma now facing policymakers in the US and Europe, struggling to respond to a deluge of Chinese technology exports that threaten rapid deindustrialization. The differing responses on either side of the Atlantic are instructive.

Washington has decided to erect sky-high tariff barriers, an approach that makes a certain sense — but only if tariffs are accompanied by smart industrial policy to nurture innovation. There are promising signs that US businesses are rallying against the challenge. One indication: A new generation of well-built, affordable EV trucks are about to roll off US assembly lines.

Europe, by contrast, appears to be debating the terms of its own industrial surrender. Meeting over a dinner of sea bass in Brussels last week, EU leaders deferred action to defend their pillar industries from a deluge of subsidized Chinese technology exports, agreeing only to create unspecified “diversification instruments” — trade tools to protect the continent. They didn’t even name China as a threat. German Chancellor Friedrich Merz, one of the attendees at the dinner, summed up the mood of indecision. According to the South China Morning Post he made two interjections: One was “forthright,” the other “urged caution.”

Far from diversifying away from China, Europe is deepening its dependencies. As European automakers retrench in the face of Chinese competition, Chinese firms are taking over the spare factory space as a part of a stealth strategy to conquer global markets.

Eventually, Beijing’s heavily subsidized export machine will run out of gas; it’s simply not possible for an economy the size of China’s to keep growing by borrowing demand from the rest of the world. The end game is possibly a debt crisis. But waiting for the Chinese economy to implode isn’t much of a strategy for the West. The threat is imminent — and existential.