China’s Grip on Strategic Industries: How Should Europe and Switzerland Respond?

Jan 30, 2025

Volkswagen, struggling with declining demand and intensifying competition, is reportedly in talks with Chinese carmakers to take over parts of its production in Europe. This development is part of a broader trend of Chinese investment in European industries. Geopolitically Correct analyses what this means for Europe and Switzerland, assessing the strategic implications for governments and businesses.

In this edition:

Chinese Investment and European Strategy
Declining EU Takeovers, Rising Swiss Interest
Lessons from the Past: “Lex China” and Switzerland

Chinese Investment and European Strategy

Volkswagen is in talks with Chinese carmakers to take over some of its production lines in Europe as it struggles with falling demand and competition.

FOR GOVERNMENTS. The potential sale of parts of Germany’s car industry to Chinese firms poses questions about strategic dependencies. And it extends beyond Germany — Chinese overproduction, fueled by state subsidies, is undercutting European industries both at home and abroad. The EU recently presented a report outlining strategies to boost industrial competitiveness, showing an effort to strengthen Europeans industries. A robust and competitive European industry is not only essential for economic stability but also for preventing key sectors from falling under foreign control.

FOR BUSINESS. In 2022, Germany exported 2.65 million passenger cars, which was still falling short of pre-pandemic levels — 3.5 million in 2019. A key reason for this decline is that German automakers were slow to adapt to the EV revolution, losing their Vorsprung durch Technik to Chinese firms like BYD and NIO, which now lead in both innovation and cost efficiency. While automobiles may not be classified as critical to national security, the growing influence of Chinese firms over European industries poses strategic risks. If key sectors fall under foreign control, this dependency can be weaponised. Europe must focus on derisking its economy while staying competitive in global markets.

Declining EU Takeovers, Rising Swiss Interest

Chinese investments and company takeovers have dropped to a 12-year low in 2023 in the EU. However, the number of Chinese investments in Switzerland increased.

FOR GOVERNMENTS. This decline is primarily due to China’s own economic challenges. As a result, Chinese companies are scaling back their expansion efforts. While takeovers have declined, greenfield investments have surged, with Chinese companies increasingly setting up their own subsidiaries in Europe to expand their presence and operations.

FOR BUSINESS. In 2023, Chinese companies completed six acquisitions or stake purchases in Switzerland — double the number from the previous year. This places Switzerland as the sixth most popular European investment hub for Chinese investors. In a world shifting towards multipolarity, economic competition is set to intensify. While fair competition crucial, rising geopolitical tensions demands that Europe reassess its dependencies. Russia’s invasion of Ukraine and weaponization of its energy, highlighted the risks of economic dependence. European businesses must future-proof their supply chains and trade relations to mitigate risk and maintain resilience.

Geopolitical insights are best when shared —send this to someone who values clarity in complexity.

The Basel-based agrochemical group Syngenta has been bought by ChemChina in 2016. Chinese and other foreign companies are buying into important sectors, says Beat Rieder, a member of the Swiss Parliament.

FOR GOVERNMENTS. In Switzerland politicians discussed the idea of controlling investment of foreign direct investments in Swiss companies better. By, among other things, setting up an authorisation authority for transactions subject to investment control. For this reason, the Swiss parliament discussed the proposition of a new law (Investitionsprüfgesetz) known as the Lex China. With the introduction of an investment review, takeovers of Swiss companies by foreign investors would be more strictly controlled. The National Council was in favour of the new law in September 2024.

FOR BUSINESS. The Economic Committee of the Council of States took a different view in their assessment. They argued that Switzerland, as a small, open economy, would suffer from a weakening of its attractiveness as a business location as a result of the introduction of this law. The situation might be different for the EU, as it is a huge economic bloc in which all member states' economies are combined.

Weekly Thought Provoker

Last week, Geopolitically Correct asked readers about How European governments and businesses should respond to Trump’s “America First” policy. The result was as follows:

75% pointed to a focus on securing favorable deals. It is pragmatic for the EU to cooperate closely with the U.S. administration. Reducing dependency on the US is unrealistic, especially as the EU increases LNG imports from the U.S. while further cutting reliance on Russian energy. Dealing with Trump’s America First policies requires a firm grasp of Realpolitik.

This week we’re asking: How should Europe deal with Chinese investment in its strategic industries? Vote and share your thoughts below:

Looking for our full analysis? Subscribe to Geopolitically Correct on YouTube, Spotify, Apple Podcasts, or your preferred platform.

In Review

On Monday, January 20, 2025, Donald Trump was sworn in as the 47th president of the United States. His reelection is part of a broader vibe shift. The effects of it were already evident before Trump’s inauguration and are now expected to intensify in the months ahead. Geopolitically Correct analyzes the implications of this shift for Europe and Switzerland, offering insights for governments and businesses.