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While it is true that China is catching up technologically and exporting increasingly sophisticated products, the country's key problem is weak domestic demand, noted Tim Rühlig in his interview with Die ZEIT (in German). "People consume little because they are uncertain about the future. Growth has slowed, wages are stagnating, youth unemployment is high, and the bursting real-estate bubble has wiped out savings."
In his new Chaillot Paper, 'China – A fragile power? How Europe can use its economic leverage over Beijing', Tim argues that, because Chinese companies are unable to absorb their output domestically, China's economy has become increasingly reliant on exports, and therefore dependent on access to Europe's single market. Against this backdrop, he proposes a four-pillar strategy for dealing with Beijing: 1) strengthening Europe's own capabilities, 2) reducing vulnerabilities through diversification, 3) establishing credible escalation tools, and 4) leveraging this position to negotiate with China and secure concessions for a level of cooperation it currently benefits from largely for free.