Europe's rush to cool off exposes policy folly

As record heat waves scorch Europe this summer, with temperatures shattering century-old records in France, Spain and beyond, a telling spectacle is unfolding. Europeans, long resistant to air conditioning due to architectural heritage rules, high installation costs and cultural habits, are scrambling for cooling relief. And where are they turning? To Chinese-made air conditioners.

Chinese customs data reveals that exports of air-conditioning units to the European Union surged dramatically — up 43.2 percent year-on-year in the first half of 2026 alone to $3.76 billion. Brands such as Midea, Gree and Hisense dominate, offering portable split units that bypass drilling restrictions in historic buildings. In Germany, secondary markets have seen units resold at 300 percent premiums, and shelves have emptied as consumers voted with their wallets for affordable, efficient Chinese engineering.

This is more than an anecdote. It is a stark metaphor for Europe's broader predicament. While Brussels obsesses over tariffs, subsidy probes and "de-risking" from China, the European public demonstrates the impossibility — and folly — of disengagement. The so-called "China Shock 2.0" narrative, peddled in elite circles, conveniently ignores the fact that Europe's industrial woes stem not from Chinese competition on the current account, but from chronic underinvestment on the capital account.

Trade flows reflect capacity built by investment decisions. European elites, fixated on import deficits and "unfair" advantages, overlook how their own financialized capitalism hollowed out domestic productive capabilities.

For decades, European legacy manufacturers — epitomized by automakers — prioritized shareholder returns over reinvestment. Stock buybacks, lavish dividends and the return on capital employed took precedence over investment in research and development, vocational training and energy infrastructure. Labor became a cost to minimize, not a strategic asset.

Yet, even then, automation lagged behind. Energy markets favored spot-trading volatility over stable, affordable industrial power. The result: exorbitant electricity costs, skill shortages in batteries and software and factories uncompetitive against those fueled by consistent capital deployment.

China's trajectory tells a different story. Starting in the 1980s, European brands profited handsomely from China's market through joint ventures — such as SAIC Volkswagen — in which they treated the country as a low-cost assembler. The dynamic flipped post-2015. Beijing's industrial policy shift toward new energy vehicles and clean technologies, combined with private enterprises' relentless reinvestment, produced global leaders.

Chinese privately owned enterprises now drive the bulk of exports, mastering battery chemistry, vertical integration and hyper-automated production. The "students" have become the masters, exporting innovation back to Europe. Yet rather than emulate this capital discipline, European rentiers cry foul over the subsidies they once benefited from.

The air conditioner boom lays bare the hypocrisy. Amid heat-induced deaths and discomfort, protectionist impulses falter against consumer reality. Proposals for new refrigerant rules or tariffs risk pricing out relief for ordinary citizens to shield inefficient local producers. This mirrors the reality that tariffs on Chinese electric vehicles and plug-in hybrids may prop up legacy margins temporarily, but they accelerate Europe's slide to becoming an industrial museum.

Simulations within the European Commission confirm that a full trade war would devastate the continent, which is more exposed than the US due to energy dependence and export reliance on China for machinery and chemicals. Beijing holds leverage over critical minerals such as lithium, graphite and rare earths. Indeed, this is cutting off one's nose to spite one's face.

The wiser path demands intellectual honesty and pragmatic engagement. European elites must shed Orientalist reflexes portraying China as a perpetual threat rather than a partner, and must also revitalize the dormant Comprehensive Agreement on Investment — signed in principle in 2020 but frozen by political posturing — repurposing it as a framework for stability, rule-of-law predictability and market access.

This would draw Chinese investment to European factories, not mere screwdriver plants.

Early signs exist of this: BYD in Hungary, Chery in Spain and Leapmotor in Poland. The EU should expand these via streamlined permitting, clean energy linkages, co-investment funds and logistical hubs.

European leaders should heed their citizens' urgent purchases:Disengagement is a luxury that the heat — and history — will not afford. Win-win cooperation, grounded in realism over ideology, remains the only viable route to renaissance.

The author is an adjunct professor at Queensland University of Technology in Australia and former policy adviser to former Australian prime minister Kevin Rudd.

The views do not necessarily reflect those of China Daily.

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