Chinese air conditioners kept Europe cool through its hottest June on record, and Beijing has presented the sales surge as proof of the "win-win" logic of EU–China trade. But as strategic competition shapes industrial policy on both sides, the challenge is no longer whether to trade, but how to identify where economic security should take precedence over efficiency - while preserving areas where trade remains mutually beneficial.
This article is part of a series on “EU-China relations: Bound by Clean Tech or Divided by it?”. The articles reflect the opinions of their respective authors and should be read in the context of this series.
The EU-China trade debate is heating up. Just before the summer break, European leaders are considering new measures to address widening economic imbalances with China. Yet as Europe debates how to reduce its trade deficit and dependence on Chinese clean tech, the continent itself is also heating up. And Chinese technology, in the form of air conditioners, is providing some much-needed relief.
Beijing Sees Air Conditioners as a Trade Success Story
June 2026 was the hottest June on record in western Europe. During the heatwave, temperatures across France, Germany, Italy and Spain reached between 5°C and 12°C above seasonal averages. Demand for air conditioners surged, and a large part of the demand is met by Chinese manufacturers: Chinese air conditioners exports to the EU rose by 43 percent year on year in the first half of 2026. Leading Chinese home appliance brand Midea’s reported that sales of its PortaSplit model, a portable split system unit adapted to western European window designs and building regulations, sold more than 200,000 in Europe so far this year, twice the level recorded a year earlier.
Chinese state media have, rightly so, presented the surge in Chinese air conditioner sales as a tangible benefit of EU-China trade: a classic case of comparative advantage and the fundamental “win-win” nature of the EU-China economic relationship. China’s industrial specialisation, supply chain efficiency and technological competitiveness have enabled it to provide products that help Europe adapt to intensifying climate shocks.
European policymakers, however, will have some doubts on the broader conclusion drawn from this argument: that de-risking or trade defense measures to address Chinese economic imbalances and supply chain dependence amount to little more than a game of “cold statistics” that will ultimately hurt ordinary consumers. This framing presents the growth in air conditioner sales as evidence that European consumers’ growing preference for Chinese products and market efficiency should outweigh European concerns about trade imbalances and industrial dependence.
In think-tank exchanges, Chinese interlocutors frequently invoke comparative advantage to explain the benefits of deeper EU-China climate cooperation. Europe, they argue, should take advantage of China’s manufacturing strength in solar panels, electric vehicles, batteries and wind technology to accelerate its energy transition and drive down soaring energy bills for consumers.
Yet this logic does not fully capture the strategic questions now confronting European policymakers. Two issues are particularly important: whether economic efficiency should still take precedence over strategic resilience, and Europe’s ability to pursue the same supply chain resilience policies that China has long sought for itself.
Europe Is Prioritising Economic Security Over Trade Efficiency
On the first issue, David Ricardo’s economic theory from the 19th century is insufficient as a guide to policy in our changing world. Comparative advantage is premised on maximising economic efficiency. Yet the past decade has shown that the conditions needed to keep this system running smoothly can no longer be taken for granted.
The shocks have taught Europe about the costs of concentrated dependence.
The shortage of personal protective equipment during Covid-19, Europe’s exposure to Russian gas dependency following the Kremlin’s decision to invade Ukraine, the disruption caused by Donald Trump’s Liberation Day tariffs, the severe disruption to European supply chains caused by China’s rare earth export restrictions in response to US tariffs, and the Strait of Hormuz energy crisis triggered by the US-Israeli war on Iran are only some of the shocks that have taught Europe about the costs of concentrated dependence.
These crises have shown that contingency and redundancy, rather than economic efficiency alone, are increasingly important to the basic functioning of society. As Europe navigates “changes unseen in a century”, diversification and localisation are not an irrational rejection of free trade. It is the logical choice for business and responsible course for governments seeking to avoid economically expedient but strategically exposed reliance on a small number of concentrated suppliers.
China grasped this strategic lesson earlier than Europe: supply chains must be able to function under extreme conditions. In articulating the dual-circulation strategy during the early stages of the Covid-19 pandemic, President Xi described the crisis as a stress test for China’s industrial supply chains. He argued that China should establish alternative sources and build self-reliant, controllable, secure and reliable domestic production systems in areas connected to national security.
This logic was subsequently embedded in China’s 14th (and 15th) Five-year Plan, new critical infrastructure legislation and in major energy sector policies. For example, a National Energy Administration document published in 2025 calls for greater control over the technologies underpinning the energy value chain and set an explicit target for the supply chains of key energy equipment to be “self-reliant and controllable” by 2030.
The Future of EU–China Trade Depends on Supply Chain Resilience
And this brings us to the second issue: reciprocity. As one CGTN commentary acknowledged, “every economy has a legitimate interest in safeguarding critical industries and strengthening supply-chain resilience”. China has long translated that interest into policy. The EU is now doing the same by raising the questions that Chinese policymakers raised years ago: which industrial and technological capabilities must continue to exist within Europe? Which may become essential in a crisis? And what would happen if access to them were suddenly disrupted?
The diversification provisions of the Net Zero Industry Act reflect this logic. Just as no major economy would willingly rely on a single or highly concentrated group of suppliers for fossil fuels, Europe has decided that no single external supplier country should account for more than half of EU supply of strategic net zero technologies. Renewable technologies are, of course, different from fossil fuels. Wind and sunlight cannot be switched off, but access to the resource is not the same as having the equipment, software, engineering and maintenance capacity needed to harness it. A country with oil reserves but no drilling capability is not energy secure. The same applies to renewable energy.
The Industrial Accelerator Act is intended to create the conditions in which Europe can retain and rebuild some of these industrial capabilities, through incentives to localisation production, national ownership conditions, and technology transfer requirements. Foreign companies operating in China have long faced similar demands, which has partly contributed to China’s industrial development in sectors such as wind and electric vehicles, an earlier model of “win-win” cooperation that Beijing might now recognise in Europe’s own approach.
Beijing has spent years deciding which capabilities China cannot afford to lose. Europe is now asking the same question.
Viewed from this perspective, the raft of incoming trade defence and industrial policy measures by the EU should not be understood as Europe abandoning free trade or cooperation, it is, rather, a response to a more volatile world that has shaped Beijing’s own pursuit of self-reliance.
Chinese air conditioners may demonstrate the “win-win” model of trade working as intended. Comparative advantage can continue to shape where trade is beneficial, but those benefits cannot override the wider questions of strategic autonomy, energy security and supply chain resilience. Beijing has spent years deciding which capabilities China cannot afford to lose. Europe is now asking the same question.
The question for the future of EU-China trade and economic relations is therefore whether both sides are prepared to recognise the same strategic logic on industrial development and economic security, identify the areas in which economic security will trump efficiency, and, on that basis, preserve the areas in which trade remains mutually beneficial.
