EU Protectionist Policies May Backfire, Chinese Media Warns

A detailed analysis published by China’s People’s Daily has warned that the European Union’s proposed Industrial Accelerator Act (IAA) could ultimately harm the bloc’s own economic interests, citing a broad range of European think tanks, business organizations, and legal experts who have raised serious concerns about the legislation’s potential consequences.

The Industrial Accelerator Act: A New Direction for EU Industrial Policy

On March 4, 2026, the European Commission published the IAA legislative proposal, a landmark framework designed to strengthen EU competitiveness and industrial resilience. The Act sets an ambitious target to increase manufacturing’s share of EU GDP to 20% by 2035, up from 14.3% in 2024, according to the European Parliament’s legislative briefing.

The IAA introduces “Made in EU” requirements in public procurement and public support programs, imposes restrictive conditions on foreign investment in strategic sectors including batteries, electric vehicles, photovoltaics, and critical raw materials, and requires foreign investors to meet conditions covering technology licensing, local procurement, local R&D, and local employment.

For investments exceeding €100 million from third countries holding more than 40% of global manufacturing capacity in relevant strategic sectors, a special review mechanism applies. Investors must satisfy at least four of six conditions, including that foreign equity stakes do not exceed 49%, at least 50% of employees are EU workers, and at least 30% of inputs are sourced from the EU.

European Experts Warn of Unintended Consequences

The People’s Daily article, authored by correspondent Niu Ruifei, draws extensively on European sources to build its case that the IAA may backfire. The Bruegel Institute, a leading Belgian think tank, warned that if European industrial policy “overemphasizes production location rather than synergy between European enterprises, European technology, European rules, and international partners, it risks turning ‘resilience’ into ‘inwardness,’ thereby weakening European enterprises’ ability to allocate resources in global value chains.”

The European Business Federation cautioned that localization requirements in public procurement and public support need “very careful” handling, as they may raise enterprise procurement costs and weaken flexible allocation capabilities in global markets. Global law firm Mayer Brown noted that certain EU procurement arrangements may be inconsistent with WTO Government Procurement Agreement obligations.

Nick Thomas-Symonds, the UK official responsible for EU affairs, warned that “overly stringent local preference requirements will create unnecessary trade barriers, push up supply chain costs, and negatively impact key UK-EU industrial supply chains.” He emphasized that both the UK and EU face challenges of improving competitiveness and productivity and “should not inflict economic harm on each other.”

Investment Restrictions Raise Concerns

The IAA’s foreign investment screening provisions have drawn particular criticism. The EU Chamber of Commerce in China stated that localization content requirements and exclusionary standards “will push up costs, weaken competitiveness, and ultimately be passed on to European consumers, delaying the普及 of green technologies.”

The European Photovoltaic Industry Association warned that while promoting domestic manufacturing development, conflicts with European electrification and energy transition goals should be avoided. If related policies lead to project cost increases, they will weaken European electricity competitiveness and affect the speed of renewable energy deployment.

The Kiel Institute for the World Economy in Germany cautioned that incorporating multiple objectives—decarbonization, supply chain security, geopolitics, and competitiveness—into the industrial policy framework simultaneously may increase costs across the value chain and heighten trade friction risks.

Structural Challenges Beyond Protectionism

Several experts quoted in the analysis argue that the IAA addresses symptoms rather than root causes of Europe’s industrial competitiveness decline. Kornel Ban, Associate Professor at Copenhagen Business School, stated that “localized procurement and localized investment requirements alone cannot solve the problem of weak European industrial competitiveness. Without supporting measures such as innovation, financing, and unified industrial policy, related measures may instead increase market costs and drag down European industrial capacity improvement.”

Mario Draghi, former President of the European Central Bank, argued in his landmark report “The Future of European Competitiveness” that the EU “must truly realize the necessity of changing its economic and governance model.” He called for major reforms, including accelerating innovation in strategic technology areas and seeking new balances in the decarbonization process.

Johannes Lindner, co-director of the Jacques Delors Institute, identified long-standing challenges facing the EU: lack of skilled labor, low digitization levels, and aging infrastructure. The Instrat Institute, a Polish think tank, warned that the EU’s attempt to promote industrial transformation through new regulatory indicators and complex approval procedures may lead to further administrative burdens, particularly in regions where administrative systems are already near capacity.

A Policy Trilemma

The analysis highlights a fundamental tension at the heart of EU policy: the simultaneous pursuit of decarbonization, strategic autonomy, and competitiveness. The IAA attempts to address all three goals but risks undermining each. Decarbonization urgency requires rapid deployment of green technologies, many of which are produced by Chinese manufacturers. Strategic autonomy demands reduced dependence on Chinese supply chains. Competitiveness requires maintaining open markets and low costs.

What Lies Ahead

As of July 2026, the IAA remains in the EU legislative process. Originally planned for 2025, its introduction was delayed multiple times due to differing positions among member states. The European Parliament’s Legislative Train Schedule shows the proposal has been tabled with rapporteurs appointed, but the final form and adoption timeline remain uncertain.

Key questions persist: Will the IAA pass in its current form, or will member states water it down? How will the EU balance IAA provisions with WTO obligations? Will Chinese retaliation follow if the IAA is enacted? And crucially, can the EU address its structural competitiveness issues without resorting to protectionist measures that may ultimately harm the very industries they aim to protect?

The People’s Daily analysis concludes that open cooperation has always been an important foundation for European economic development, and that protectionist measures that “build walls and set limits” will not only fail to solve underlying problems but may weaken European market vitality and international competitiveness.