Ninety-four percent of the solar panels installed across the European Union come from China. Brussels just proposed a law that would make it significantly harder for Chinese companies to keep doing so.

Beijing noticed.

China’s commerce ministry on Monday warned it would take countermeasures if the EU presses ahead with its Industrial Accelerator Act, legislation designed to rebuild Europe’s industrial base by restricting foreign — effectively Chinese — access to public funds and procurement contracts in strategic sectors.

The Law That Names No Names

Unveiled in March after months of internal wrangling within the European Commission, the act requires companies seeking public support in cars, green technology, and steel to meet minimum thresholds for EU-made content. In the automotive sector — where implementation would be fastest — at least 70% of a vehicle’s component value (excluding the battery) must originate in the EU, according to analysis by the Institute for Sustainable Development and International Relations (IDDRI). The traction battery must contain at least three components of European origin, including the cells themselves.

Foreign direct investment from countries controlling more than 40% of global market share in a targeted sector faces additional conditions: joint ventures capped at 49% foreign ownership, a mandatory European workforce of at least half, and required technology transfers for investments exceeding €100 million.

No country is named in the legislation. None needs to be. China controls the vast majority of clean technology value chains — including 94% of EU photovoltaic cells, 93% of permanent magnets for wind power, and 93% of active anode materials for batteries, according to IDDRI data.

Beijing Draws Its Own Line

China’s commerce ministry submitted formal comments to the European Commission on Friday, calling the proposal “institutional discrimination” and accusing Brussels of violating fundamental World Trade Organization principles, including most-favoured-nation treatment.

“If the EU disregards China’s comments and pushes ahead with enacting the legislation, causing damage to Chinese companies’ interests, China will take countermeasures to firmly safeguard the legitimate rights and interests of Chinese enterprises,” the ministry said in a statement.

The Chinese Chamber of Commerce to the EU separately warned that the plan marks a shift toward protectionism that would damage trade cooperation between the two blocs.

What Retaliation Could Look Like

Beijing has not specified what form countermeasures might take. The toolbox is well-stocked. European companies export luxury goods, automotive components, pharmaceuticals, agricultural products, and industrial machinery to China — all weaponised in previous disputes. China also retains powerful leverage through its dominance of critical raw materials processing, including rare earths essential to European manufacturing.

The EU’s automotive sector is acutely exposed. Already straining under the electric vehicle transition and facing existing EU tariffs on Chinese-made EVs, European carmakers would be vulnerable to reciprocal tariffs or restrictions on their extensive Chinese operations.

Protectionism, With Caveats

European officials are not blind to the risks. EU industry commissioner Stéphane Séjourné, who championed the legislation, declined to identify which trading partners would be affected.

“There’s no point in drawing up lists […] I want to tread very cautiously on this subject, trade wars are being discussed all over the world at the moment, I don’t want to add any aggravating elements to anything at this stage,” Séjourné told a press conference in Brussels, according to the Irish Times.

Earlier drafts of the legislation were revised after being deemed too protectionist — too “French,” in the blunt characterisation of some officials — and the final text broadens the definition of “EU content” to include goods from roughly 80 countries with EU free trade agreements. The restrictions are designed to apply only where foreign investors from dominant-market nations set up operations with minimal local involvement.

“We’ve seen quite a number of examples in some of our member states where they basically come to a piece of European land, they build their factory, they come with thousands of Chinese workers, and they run the factory on their own, with very little local added value,” one commission official said.

A Long Fuse

The legislation faces a protracted path through the Council of the EU and the European Parliament, with adoption unlikely before 2027. Provisions for heavy industry would not take effect until 2029. The sectors covered represent roughly 15% of EU production capacity, but they are structurally critical — shaping downstream supply chains across the entire economy.

The direction is unmistakable. The EU spent years warning about Chinese industrial dominance. It is now legislating against it. Beijing’s threat of retaliation is the predictable next move in a trade conflict that neither side can easily afford to escalate — and neither side appears willing to de-escalate.

Sources