Avoiding the China shock: How Chinese state-backed internationalization drives changes in European economic governance

The state-backed internationalization of Chinese companies has led to conflicts in the EU over potential market distortions and security concerns. The EU has responded to this challenge with increasing state intervention and defensive measures in trade and investment regulation, competition policy, and industrial policy. Drawing on comparative capitalisms research and Neo-Gramscian perspectives on European integration, we analyze how European economic governance has changed under the pressure of Chinese competition. Based on 31 semi-structured expert interviews and a document analysis, this exploratory study examines the EU’s response in these policy fields. We observe a gradual, albeit contested change of European Economic Governance in two phases since 2017, primarily driven by a new “China-threat-coalition” in Germany. We argue that there is no overall paradigm shift in the neoliberal mode of European integration, but there are nonetheless significant changes as new “filter functions” have emerged that tend to “bypass” EU economic governance and filter out “market-distorting” state-capitalist influences.