FIW-Policy Brief 76 ‚China as a Competitor, Supplier and Power Player: Empirical Evidence and Trade Policy Options for Austria and the European Union‘

Key points:

• China is simultaneously Austria’s second most important supplier, a rapidly growing competitor and a source of strategic dependencies. China’s share of Austrian imports of goods rose from 1.7% (2002) to 9.0% (2025). In the first quarter of 2026, the bilateral deficit in goods trade reached around €3.6 billion, or just under 2.9% of GDP – around 1½ percentage points more than before the pandemic.
• Direct trade figures underestimate the degree of interdependence. In terms of value added, China is about as important for Austria as it is for the EU as a whole; since 2021, Chinese value added in Austrian final demand (3.1% of value added) has clearly exceeded Austrian value added in Chinese final demand (2.2%).
• A ‘China Shock 2.0’ is hitting Austria’s key industries. China’s export structure increasingly resembles Austria’s; gains in global market share are now concentrated in vehicles, metals and machinery. In the 2025 WIFO Industry Survey, firms with Chinese main competitors are significantly more likely to plan relocations and job cuts, but are increasingly responding proactively by upgrading their product portfolios.
• The most critical dependencies lie in the intermediate stages of the value chain (e.g. permanent magnets) and are increasingly being used as leverage, as shown by seven documented cases since 2021 and China’s export controls on rare earths.
• Geo-economic power arises from asymmetric dependencies. Seven strategic dependencies of the EU can be distinguished – four sectoral (critical raw materials, semiconductors, energy, pharmaceuticals) and three systemic (payment infrastructure, digital infrastructure, maritime logistics). ‘Voluntary’ export restraints and narrowly defined ‘Buy European’ requirements are generally not advisable as a response to the China shock.
• In terms of trade policy, a targeted, rules-based approach is recommended instead of blanket tariffs: faster and more broadly defined trade defence as a short-term priority; diversification via trade agreements, resilience criteria in procurement and funding and – for critical consumer goods – diversification tariffs; on the offensive side, a horizontal competition and innovation agenda; in external relations, open plurilateral trade and resilience agreements with like-minded partners, deep cooperation between the EU and the member countries of the CPTPP, and a deepening of the single market as the EU’s most important source of leverage. For Austria, location policy is the most important national lever.

Gabriel Felbermayr (Austrian Institute of Economic Research (WIFO), Vienna University of Economics and Business (WU Vienna))
China as a Competitor, Supplier and Power Player: Empirical Evidence and Trade Policy Options for Austria and the European Union
FIW-Policy Brief 76
November 2026
Language: English