CHOICE Newsletter: Why 2026 Will Test Europe’s China Strategy

Dear reader,

Welcome to the first CHOICE newsletter of 2026. A new year always brings new momentum – and our team has several exciting projects in the pipeline (more on those soon). But it also begins amid continued uncertainty in EU–China relations. In Central Europe, the new Czech government has surrounded itself with familiar faces long linked to past China engagements; in Germany, several state elections will test political currents; and parliamentary elections in Hungary, Latvia, and Slovenia will indicate to what extent China becomes an electoral issue – and how the results could reshape each country’s stance toward Beijing.

In this issue, we highlight what three outstanding analysts see on the horizon for 2026. Alicja Bachulska warns that EU–China tensions are set to sharpen as Brussels pulls away while some European capitals drift closer to Beijing, testing whether Europe can reduce dependencies without losing geopolitical relevance. Rebecca Arcesati notes that Washington’s shift from technology denial to managed dependence marks a major win for China, accelerating the diffusion of AI across its economy even as Beijing doubles down on long-term tech self-reliance. Alicia García-Herrero expects that after an exceptionally strong and resilient 2025, China’s economy is likely to slow as protectionism rises worldwide and structural imbalances persist, leaving Europe facing an increasingly difficult trade landscape. Konrad Szatters turns to Brussels, arguing that 2026 will be shaped by the enforcement of existing instruments and by the decisive role of major member states – predominantly Germany – in determining how Europe will act vis-à-vis China in an international system increasingly marked by geopolitical realism.

As we step into 2026, we hope it will be a year of clarity, resilience, and smart policymaking for Europe – and one in which our community continues to navigate complexity with rigor and purpose.

Wishing you a great start to the year!

By Ivana Karásková, CHOICE Founder and Team Lead (based in Prague)

CHOICE Quick Takes

Intensified Tensions Await EU-China Relations

I anticipate 2026 will intensify tensions in EU–China relations, with divergent push-pull factors driving Brussels farther from Beijing, while drawing some European capitals closer in a classic divide-and-rule play. Europeans must master a delicate balancing act: reducing dependencies on China without rocking the boat too hard.

This proves challenging amid mounting pressures: crumbling transatlantic ties, threats to European security, prosperity squeezed by both the US and China, and escalating domestic economic, social, and environmental woes. Strikingly, most of these carry an embedded China dimension, as China policies now permeate trade, industry, clean tech, and security strategies. 

The upcoming year will test whether Europe rises to this moment or risks geopolitical irrelevance. Meanwhile, China endures prolonged “struggle,” viewing Europe as leaderless and powerless. It’s high time to prove Beijing wrong.

Chinese Tech Starts the Year on the Right Foot

The year 2026 is set to be off to a good start for Chinese tech as the geopolitical tide is turning. Reversing years of export control policy, US President Donald Trump announced on December 8 that Nvidia would be allowed to sell its H200 accelerators to China-based customers. The H200 is Nvidia’s second most powerful product, designed for artificial intelligence (AI) workloads and high-performance computing. The move is the clearest signal yet that Washington is swinging from a strategy of technology denial to one that seeks to keep the PRC dependent on US-designed semiconductors.

While Beijing’s official reaction has been muted, this shift is undoubtedly a major win for China. With fewer constraints on foreign compute access and favorable policies incentivizing wider adoption of indigenous chips, the country’s computing power infrastructure is likely to score gains in efficiency and performance, supporting strategic national ambitions in science, technology, and industry. Central to those ambitions is the diffusion of AI technology across China’s economy and society through the “AI Plus” initiative. Expect AI diffusion to take priority in the upcoming Five-Year Plan (2026-2030).

Unlike the US, China will be sticking to its existing strategy to win global technological competition, prioritizing self-reliance above all else. This means that foreign technology will remain important for filling critical gaps in domestic capacity, but not indefinitely. As soon as local alternatives for hardware and software become viable, Beijing will not hesitate to orchestrate import substitution.

China Push for Laxer Policies in 2026 Will Not Rebalance Its Economy

After a very resilient 2025, mostly supported by rapidly growing industrial capacity and exports, the Chinese economy is bound to decelerate in 2026. Such rapid export growth will be hard to maintain in 2026 as the world – not only the US – is becoming more protectionist. The EU, China’s largest export partner, is piling up measures to protect its market from China’s overcapacity.  Emerging economies – including neighboring ASEAN but also India – are increasingly worried about growing trade deficits with China. This means that protectionism is to beexpected from the Global South even if their room for maneuver is generally limited, especially for smaller countries.

China’s domestic demand remained weak in 2025 even if China conducted a moderate – but relevant – fiscal stimulus geared mostly towards infrastructure. The lack of relevant fiscal support for private consumption has not helped rebalance the economy in 2025 and there is no reason to believe that this is bound to change. As clearly stated in the draft Five-Year Plan for the 2026-2030 period, China will continue to prioritize production and innovation. The side effect of this is that China’s growing imbalances with the rest of the world, Europe included, are here to stay.

CHOICE in Brussels

Brussels and China at an Inflection Point in 2026

As Brussels dives into the new year, EU–China relations stand at an “inflection point” driven by deepening economic competition, geopolitical uncertainty, and EU’s remilitarization and reindustrialization efforts. As laid out in the 15th Five-Year Plan (2026-2030), China’s priorities in the foreseeable future will center on modernization and innovation, particularly in AI and advanced technology sectors. However this shift does not imply China’s retreat from its vast production (over)capacities in less advanced industries, which remain central to its economic model, and present a great challenge for the EU’s market and industry. 

Thus, for the Union, de-risking – not de-coupling – will remain the guiding principle. In 2026, Brussels may continue reviewing and sharpening enforcement of instruments such as the Foreign Subsidies Regulation and the Anti-Coercion Instrument to respond to any potential market disruptions and Chinese state subsidies for its companies, as illustrated by the ongoing probes into Chinese platforms and active tariffs on electric vehicles. Trade tensions may further intensify with new measures like a planned EU fixed €3 customs duty on low-value e-commerce parcels from July 1, 2026, aimed at curbing the influx of cheap imports, predominantly from China.

At the political level, the EU’s stance vis-à-vis China will be shaped not only by Brussels but predominantly by the Union’s largest member states. European Commission President Ursula von der Leyen and French President Emmanuel Macron seem to have recently struck a similar tone: both of them argue that an “urgent” rebalancing of EU–China relations is needed and that Europe must strengthen competitiveness and innovation, while China should boost domestic demand and encourage investments in Europe. While Macron and von der Leyen’s like-mindedness on China may be a good omen,  in practice however, the future of EU–China policy will above all depend on Germany. As the EU’s largest economy and one of China’s most important trading partners, Berlin’s approach remains a key variable and one to watch closely in 2026 as the EU seeks to find its way not only vis-à-vis China but also in an international system increasingly shifting away from liberal paradigms toward geopolitical and economic realpolitik. 

By Konrad Szatters, CHOICE Analyst (based in Brussels)

WiCH Highlights

Nataliya Butyrska, WiCH Co-Chair for Ukraine, wrote a brief on North Korea’s Military Involvement for European and East Asian Security. Read it here! 

Sari Arho Havrén, WiCH Co-Chair for Finland, was interviewed in Polish about Xi-Trump relations in light of Ukraine and Taiwan. Check it out here!

Abigaël Vasselier, WiCH Co-Chair for Belgium, co-authored a report on the state of European countries’ resilience towards China. Read it here!

CHOICE News

 Paulína Ovečková co-authored an article in The Diplomat on the evolving intellectual property protection in China (read it here) and was interviewed about the US-China rivalry for the Summit Talks podcast (listen here).

 We’re on Bluesky, LinkedIn, X, and Instagram! Stay updated with our latest articles, insights, and news by following our accounts – don’t miss out on valuable content and updates.

This is the web version of our newsletter. If you’d like to receive the CHOICE newsletter in advance, straight to your inbox, sign up here: