English for Diplomacy

Due to slow implementation and pushback from national governments, the European Union's response to the Draghi Report two years after its release is widely seen as falling behind schedule.

Current Status and Response (as of Late 2026)

Implementation Rate: Independent tracking indexes (such as EPIC's Draghi Implementation Index) place the delivery of Mario Draghi's 383 recommendations at roughly 41.3%, showing a major slowdown in the first half of 2026. Other assessments, like the Institut Montaigne Study, estimate the legal implementation rate closer to 30%.

· Energy Sector Bottlenecks: Energy measures sat at roughly 22.9% implementation (strict and partial combined) early in 2026, making it one of the weakest performing sectors. The Energy Directorate (DG ENER) recorded a strict implementation rate of only 2.7%.

· Persistent High Energy Costs: Geopolitical tensions and fossil fuel import dependencies continue to inflate costs, with EU governments forced to spend €17.9 billion across 25 member states in 2026 on untargeted energy price relief measures.

· Contrast with Defense: While energy and core single-market integration reforms stall due to high costs and political friction, defense-related recommendations jumped sharply to nearly 78.6% implementation over the same period.

· No Full Execution: Industry assessments note that not a single key Draghi recommendation for structural economic transformation has been fully executed.

The "Rhine Group" Pressure: Frustrated by bureaucratic delays and political inertia, Mario Draghi and Stripe CEO Patrick Collison launched the ‘Rhine Group’ in August 2026—a network of roughly 55 business leaders, economists, and policymakers intended to bypass national resistance and force concrete execution.
The EU's Policy Mechanism: The European Commission has attempted to channel the report's roadmap into its Competitiveness Compass and upcoming multi-annual financial framework (2028–2034), focusing on an estimated €750 billion to €800 billion in annual investment needed for decarbonization, defense, and closing the tech/AI gap.
Key Bottlenecks: While Brussels has managed "politically easy" goals (such as select sustainability reporting simplifications and defense loans), major structural reforms—specifically deep Single Market integration, Capital Markets Union rules, and unified energy pricing—continue to stall due to member-state political pushback.

https://www.euronews.com/2026/09/10/eu-falls-short-on-draghi-reform-agenda-new-report-shows

https://www.politico.eu/article/mario-draghi-plan-2-competitiveness-crusade-runs-europe-old-politics/

and the current energy crisis

https://www.eunews.it/en/2026/10/16/joint-action-on-energy-prices-pushback-against-the-green-deal-fast-track-legislation-eu-leaders-recipe-for-competitiveness/

https://www.euinsider.eu/news/epic-draghi-energy-laggard-2026

https://electrification-alliance.eu/a-draghi-style-report-on-energy-security/

Competitors and competitiveness

Measuring competitiveness by country

https://www.imd.org/centers/wcc/world-competitiveness-center/rankings/world-competitiveness-ranking/rankings/wcr-rankings/#_tab_Rank 2026

https://www.visualcapitalist.com/ranked-the-worlds-most-competitive-economies-in-2026/

https://www.visualcapitalist.com/ranked-the-worlds-most-prosperous-countries-in-2026/

https://www.visualcapitalist.com/mapped-the-worlds-most-innovative-economies-in-2026/

https://www.visualcapitalist.com/ranked-the-worlds-top-destinations-wealth-migration/

https://www.investopedia.com/insights/worlds-top-economies/

The EU and competitiveness in 2026

In 2026, the European Union's economic approach is shaped by its official 2026 Annual Single Market and Competitiveness Report and the IMD World Competitiveness Ranking. While selected northern and western EU nations dominate the top 10 globally, traditional European economic heavyweights are facing notable declines.

The 2026 EU Ranking Landscape

The EU presents a highly polarized competitiveness landscape. According to the 2026 IMD World Competitiveness Ranking, agile European economies lead the way, while the largest eurozone powers continue to slip:

The Global Top 10 Leaders: Switzerland (3rd), Denmark (6th), Ireland (7th), Netherlands (8th), and Sweden (9th).
Declining Heavyweights: Germany dropped to 23rd, Belgium slipped to 32nd, and France fell to 36th.

Key Strengths

The World Economic Forum and the European Commission highlight several structural pillars backing EU resilience:

Institutional Credibility: A highly stable, predictable, and transparent regulatory environment serves as a major economic buffer.
Green and Biotech Leadership: The EU remains a clear global leader in green innovation and biotechnology.
Massive Consumer Base: A seamless Single Market of 450 million consumers with robust consumer protection standards.
Strong STEM Talent Base: The EU continues to turn out a highly skilled science, technology, engineering, and math workforce that outpaces many international rivals.

Critical Weaknesses

The EU's Competitiveness Compass identifies fundamental bottlenecks preventing the bloc from transforming its raw knowledge into direct productivity:

The Innovation and Research and Development Gap: The EU's overall R&D spending stagnates at 2.2% of GDP, failing to meet its 3% target and trailing major global competitors.
Scale-up and Venture Capital Deficit: Venture capital sits at a low 0.06% of GDP. European startups routinely struggle to secure growth finance, often moving abroad to scale up.
Energy Cost Disadvantage: Electricity and energy costs remain structurally high, burdening heavy industries and weakening short-term cost competitiveness.
Single Market Fragmentation: Internal barriers persist, especially in the services sector (integration sits at just 7.9%), creating unnecessary bureaucratic red tape.
Strategic Technology Dependencies: Severe reliance on external powers for critical raw materials, semiconductors, cloud computing, and advanced AI technologies

https://single-market-economy.ec.europa.eu/publications/2026-annual-single-market-and-competitiveness-report_en

https://www.zabala.eu/news/european-semester-2026-innovation-competitiveness/

So in 2026, the European Union has made competitiveness a core policy focus—led by the "One Europe, One Market" agenda and promoted as a defining priority by European Council President António Costa.

Key Pillars of the EU Competitiveness Strategy for 2026

Single Market Completion: The EU aims to remove major internal trade and regulatory barriers by March 2027, supported by an interinstitutional roadmap signed in April 2026.
"EU Inc." Company Regime: A single voluntary corporate framework is moving forward to let businesses operate seamlessly across member states without juggling 27 distinct national legal regimes.
Red Tape Reduction and Simplification: The European Commission has rolled out multiple Omnibus proposals (including packages in June 2026 targeting energy labelling and tax rules) aimed at generating €18 billion in annual administrative savings immediately, with a goal of cutting administrative burdens by 25% across the board (and 35% for SMEs) by 2029.
Capital Markets and Investment Union: Efforts are underway to deepen the Savings and Investments Union, advance the digital euro, and unlock venture capital and R&D funding (such as Horizon Europe and the 2026 EU budget allocations) to bridge Europe's innovation gap.
Energy and Industrial Renewal: To counter high energy costs and prevent deindustrialization, the EU is pushing short-term price toolkits, the European Grids Package, and local decarbonization and clean-tech strategies.
Economic Security & Strategic Autonomy: Policy is strongly tied to reducing dependencies on global shocks, securing critical materials, and advancing defense and military mobility packages.

Italy and competitiveness in 2026

Italy's competitiveness faces a distinct paradox: while individual medium-sized enterprises and niche sectors rank among the most productive in Europe, the broader national economic system lags behind.

Key Competitiveness Indicators (2026)

World Competitiveness Index: Dropped to 61.70 points in 2026 (down from 62.50 in 2025), marking a mild contraction after a prior growth period.
GDP Growth: Projected around 0.8% for 2026, trailing the broader eurozone average.
Public Debt: Hovering near 150% of GDP, limiting state-led fiscal stimulation.
Productivity Paradox: Individual firms of a given size are highly efficient, yet the aggregate system suffers from structural fragmentation (heavy reliance on micro and small enterprises that struggle to scale or invest in R&D

Core Strengths

Global Excellence in Niche Sectors: Strong performance in circular economy practices (an 18.7% circular material use rate and an 83.2% waste recycling rate), mechanical engineering, luxury goods, design, and the chemical industry.
Medium-Sized Enterprises ("Champions"): Agile, export-oriented mid-sized firms combine specialized design with high internationalization.
High Household Wealth and Social Cohesion: Substantial private savings provide an underlying cushion and potential capital source for productive investments.
Strategic Geography: Serves as a primary logistics bridge for Mediterranean and Asian trade flows.

Structural Weaknesses and Bottlenecks

Business Scale and Fragmentation: Too many small firms lack the critical mass to innovate, adopt digital infrastructure, or invest heavily in human capital.
High Costs and Infrastructure Gaps: Energy and logistics costs run noticeably higher than EU peers (electricity costs roughly 25% higher; logistics costs about 30% higher), alongside persistent regional disparities (the Mezzogiorno gap).
Labor Market and Demographics: Low labor participation rates for women and youth, high NEET (Not in Education, Employment, or Training) shares, and an aging population constrain labor supply.
Regulatory and Administrative Friction: Slow judicial processes, complex compliance rules, and high tax wedges continue to deter foreign and domestic long-term investment.

https://www.investinitaly.gov.it/en/why-italy/competitiveness-pillars

https://www.oecd.org/en/publications/foundations-for-growth-and-competitiveness-2026_40a7532f-en/full-report/italy_8ffddd80.html

https://en.ilsole24ore.com/art/the-italian-paradox-excellent-companies-an-unproductive-system-AJ7RvnsB

n the Global Attractiveness Index 2026 (by The European House – Ambrosetti), Italy confirms its 17th place worldwide, while improving its score from 60.8 to 62.1 points (+1.3 points), ranking ahead of countries like Austria, the Czech Republic, Spain, and Belgium.

Key highlights regarding Italy's economic attractiveness and rankings in 2026 (in English):

Global Attractiveness Index 2026 (Ambrosetti): Italy stays at 17th globally, building on a recovery of 5 positions since 2022 and showing stronger structural fundamentals despite limited room for further short-term jumps.
Foreign Direct Investment (FDI) and the European Context: According to the EY Attractiveness Survey Italy, 206 FDI projects were announced in Italy, reflecting an 8% drop that mirrors a broader 7% general slowdown in European investment projects amid geopolitical and trade tensions.
Trade and Export Strength: Italy remains a top global exporter and the 8th largest manufacturing economy worldwide, backed by record export values.

https://en.lasicilia.it/news/economy/3070726/global-attractiveness-index-2026-italy-improves-its-score-and-rises-to-17th-place-but-the-situation-remains-fragile.html

https://www.ey.com/it_it/newsroom/2026/07/ey-attractiveness-survey-italy-nel-2025-litalia-consolida-la-propria-quota-di-mercato-in-europa

https://www.esteri.it/en/temi/diplomazia_economica/l-attrazione-degli-investimenti/l-italia-nei-ranking-internazionali/

https://economy-finance.ec.europa.eu/economic-surveillance-eu-member-states/country-pages-including-country-reports/country-report-italy_en

https://economy-finance.ec.europa.eu/document/download/508668f7-40b0-4a50-a473-339df4f93dbd_en?filename=IT_SWD_2026_212_1_EN_autre_document_travail_service_part1_v5.pdf

https://digital-strategy.ec.europa.eu/en/factpages/italy-2025-digital-decade-country-report

https://www.ice.it/it/sites/default/files/inline-files/RCE%2026%20-%20Digitale%20low.pdf

countries by various rankings

https://www.visualcapitalist.com/cp/competitive-countries-rankings/

https://www.imd.org/centers/wcc/world-competitiveness-center/rankings/world-competitiveness-ranking/rankings/wcr-rankings/#_tab_Rank

https://gfmag.com/data/non-economic-data/most-advanced-countries-in-the-world/

https://research-and-innovation.ec.europa.eu/statistics/performance-indicators/european-innovation-scoreboard_en

https://en.wikipedia.org/wiki/List_of_countries_by_exports

Companies worldwide and how they rank

https://companiesmarketcap.com/

https://companiesmarketcap.com/tech/largest-tech-companies-by-market-cap/

https://money.usnews.com/investing/articles/artificial-intelligence-stocks-the-10-best-ai-companies

https://statranker.org/digital-innovation/top-100-companies-by-rd-spending-2026/

https://capital.com/en-int/markets/shares/largest-financial-services-companies-by-market-cap

https://en.wikipedia.org/wiki/List_of_largest_financial_services_companies_by_revenue

https://www.reliablesoft.net/top-10-search-engines-in-the-world/

https://en.wikipedia.org/wiki/List_of_largest_energy_companies

https://companiesmarketcap.com/engineering/largest-companies-by-market-cap/

https://companiesmarketcap.com/defense-contractors/largest-companies-by-market-cap/

https://www.investopedia.com/investing/top-alternative-energy-companies/

https://energydigital.com/top10/top-10-renewable-energy-companies-2026

https://en.wikipedia.org/wiki/List_of_largest_technology_companies_by_revenue

https://companiesmarketcap.com/electronics/largest-electronic-manufacturing-by-market-cap/

However, assessing the true intrinsic value of Chinese companies in 2026 presents an incredibly complex puzzle for international investors, analysts, and enterprise risk management professionals. This is due to a mix of systemic data fog, heavy state capitalization, domestic structural challenges and aggressive competitive distortions. For example, a firm’s stated asset value may hide toxic real estate exposure. There is also the growing politicization of the business environment.

China’s Belt and Road Initiative - an update

European assessments of China's Belt and Road Initiative (BRI) in 2026 highlight a significant structural transition, frequently characterized by think tanks and academic circles as the shift into "BRI 2.0." While early iterations focused on massive, capital-intensive megaprojects funded by state-backed policy banks, European analysts see a leaner, more strategic, and reconfigured framework embedded within China’s 15th Five-Year Plan (2026–2030).

The European perspective on the BRI in 2026 centers on three major trends, a "two-speed Europe" structural division, and the ongoing competition with the EU’s own initiatives.

1. The Core Shift: The Rise of "BRI 2.0"

The BRI is far from being in retreat. Instead, it has turned into a more selective and model aimed at durability:

Reconfigured Financing: Large, high-risk lending from Chinese state-owned policy banks has contracted. In its place, projects are increasingly financed via host-country budgets, multilateral development finance institutions, commercial capital, and private Chinese enterprises (which now account for nearly half of BRI engagement value).
Sectoral Pivot: Investment has shifted away from traditional heavy transport infrastructure toward the energy transition (especially green energy), critical minerals, high-tech manufacturing, and digital frameworks.
The "Small yet Beautiful" Mantra: The official Chinese rebranding focuses on green, clean, and smaller-scale, high-return projects rather than financially precarious mega-infrastructure.

2. The "Two-Speed Europe" Map

European studies, argue that the BRI fractures geographically across the European continent into a "two-speed Europe"

Region	Primary Investment Focus	Local Stance and Strategic Concerns
North-Western Europe	Digital Silk Road (DSR): Telecommunications, 5G, data centers, financial technology, and technology transfers.	Highly Skeptical: Deep anxiety over cybersecurity, data protection, and critical infrastructure dependencies. Many countries have actively removed or restricted Chinese tech providers like Huawei.
South-Eastern Europe and Western Balkans	Traditional Infrastructure: Hard infrastructure, maritime ports (e.g., Piraeus), railways, and Special Economic Zones (SEZs).	More Favorable / Pragmatic: Viewed as a vital mechanism for developmental opportunity and rapid economic growth, though Western Europe warns this poses long-term threats to EU integration and political sovereignty.

3. Geopolitical Tensions in the EU's Neighborhood

European analyses increasingly focus on how the BRI competes with EU security and energy interests. As highlighted by Cambridge University Press documentation on energy independence, China's heavy investments in Central Asia and the Caspian region—bypassing traditional Western ESG metrics—directly rival the EU’s neighborhood governance and energy diversification goals.

Furthermore, reports in The Diplomat indicate that deep tech and security integration within non-EU European states (such as Serbia’s widespread deployment of Chinese surveillance technology and its Free Trade Agreement with Beijing) are creating sharp hybrid warfare risks, forcing a definitive alignment choice between East and West.

4. Europe's Counter-Strategy: The Global Gateway

In response to the BRI's resilience, European policymakers have doubled down on the EU Global Gateway. However, an internal assessment framework by the European Parliament notes that for the Global Gateway to serve as a truly credible alternative to China's agile state-business synergy, the EU must urgently reform its bureaucratic governance structures, speed up its decision-making, and better incentivize private European investors.

Background

What is China's Belt and Road Initiative (BRI)? A brief history, its objectives and a review of its evolution and current state.

https://en.wikipedia.org/wiki/Belt_and_Road_Initiative#:~:text=The%20initiative%20was%20launched%20by,21st%20Century%20Maritime%20Silk%20Road.

The Belt and Road Initiative primarily addressed an "infrastructure gap" and thus has the potential to accelerate economic growth across the Asia Pacific, Africa and Central and Eastern Europe. It is a central mechanism of Chinese foreign policy and development finance. The initial focus has been infrastructure investment, education, construction materials, railway and highway, automobile, real estate, power grid, and iron and steel. Already, some estimates list the Belt and Road Initiative as one of the largest infrastructure and investment projects in history, covering more than 68 countries. The BRI outlined six economic corridors for trade and investment connectivity.

The BRI develops new markets for Chinese firms, channels excess industrial capacity overseas, increases China's access to resources, and strengthens its ties with partner countries. The initiative generates its own export demand because Chinese loans enable participating countries to develop infrastructure projects involving Chinese firms, banks and expertise. The infrastructure developed also helps China to address the imbalance between its more developed eastern regions and its less developed western regions.

For developing countries, the BRI is appealing because of the opportunities it offers to alleviate their economic disadvantages relative to Western countries. The BRI offers them infrastructure development, financial assistance, and technical assistance from China. The increase in foreign direct investment and increased trade linkages also increases employment and poverty alleviation for these countries. The link below explains where the BRI stands today.

https://www.sanchez.vc/geocoded-special-reports/the-state-of-chinas-belt-and-road-initiative-august-2025 Very good!

By July 2025 roughly 150 countries had signed memoranda of understanding (MoUs) with China under the BRI, although a handful have re-evaluated or withdrawn (Italy in December 2023 and Panama in February 2025). GreenFDC calculates cumulative economic engagement (construction contracts + investment) since 2013 at US $1.308 trillion as of mid-2025. In fact, 2025 saw the highest BRI engagement ever for any year, with USD 128.4 billion in construction contracts and about USD 85.2 billion in investments; China's energy related engagement in 2025 were the highest in any period since the start of the BRI's reaching USD 93 billion.

The BRI’s new strategy:

Smaller – "small and beautiful" projects. After years of megaprojects, Beijing announced in November 2021 that BRI projects should be "small and beautiful"—i.e., better targeted, less wasteful and often co-financed.

Greener – China introduced a green taxonomy in 2020/2021 that put most fossil-fuel projects in a "red" category and committed in September 2021 to stop building new coal-fired power plants abroad. Green investments nonetheless account for a minority of new spending, and fossil-fuel engagements—especially oil and gas in the Middle East—remain significant.

Debt sustainability – China has engaged in debt workouts under the G-20's Debt Service Suspension Initiative (DSSI) and Common Framework. For example, China and France co-led a restructuring of US$6.3 billion of Zambia's debt in June 2023. The new emphasis on project finance and syndicated loans (e.g., Peru's Chancay port secured a US$975 million project loan) aims to reduce sovereign exposure

Private-sector participation – Private Chinese firms now lead many BRI investments, whereas state-owned enterprises (SOEs) dominated the first decade. This shift reflects domestic overcapacity, the drive to secure critical minerals and technology supply chains in a potential trade-war.

Geoeconomic competition. Alternatives to the BRI include the G7 Partnership for Global Infrastructure and Investment (PGII), which has mobilised over US$60 billion since 2021 and aims for US$200 billion by 2027; the EU Global Gateway; the India–Middle East–Europe Economic Corridor (IMEC); Japan's Quality Infrastructure; and GCC sovereign funds. While these initiatives are smaller than the BRI, they shape host-country options and raise standards.

Why Italy withdrew from the BRI and relations today:

https://www.iai.it/en/publications/c05/timing-everything-italy-withdraws-belt-and-road-initiative

https://www.euronews.com/my-europe/2024/07/28/italy-and-china-sign-a-3-year-plan-as-italian-leader-meloni-tries-to-reset-relations

https://www.unimpresa.it/disavanzio-italia-cina/70464#:~:text=In%20sei%20anni%20il%20disavanzo,importazioni%20italiane%20dai%20mercati%20cinesi.

https://www.dw.com/en/eu-china-relations-hit-rock-bottom-before-beijing-summit/a-73213412

https://www.economia-italia.com/meloni-asia-contratti-italia-investimenti-2026

https://chinaobservers.eu/italy-china-relations-the-diplomacy-of-conscious-pragmatism/

See the link at the bottom of the page – Italy’s “golden power” rules

Has the BRI helped Africa and Asia to develop?

https://aec.afdb.org/en/papers/does-belt-and-road-initiative-boost-industrialization-empirical-evidence-africa-694

https://caspianpost.com/caucasus-caspian-intelligence/china-s-quiet-expansion-in-central-asia-and-the-caucasus-belt-and-road-strategy

Revently China has reduced lending to Africa

https://www.semafor.com/article/01/23/2026/china-pulls-back-on-funding-african-projects

https://www.bbc.com/news/articles/cx2yl88wd3lo

Corruption in Africa remains a challenge to investment and develpment

https://theglobepost.com/2024/08/08/africa-corruption-barrier-investment/

Criticisms of the BRI:

https://vrfbharat.org/why-chinas-belt-and-road-initiative-is-failing-with-no-coherent-plan-and-no-end-in-sight/

https://www.euronews.com/2023/10/17/cash-corruption-crumbling-dams-thats-chinas-belt-and-road-initiative-10-years-in

https://thediplomat.com/2025/11/chinas-sahel-gamble-falters-as-insurgencies-rage/

However, one should return to the article we looked at before for a more positive view https://www.sanchez.vc/geocoded-special-reports/the-state-of-chinas-belt-and-road-initiative-august-2025

While China's leadership promoted a "green, high-quality" BRI at the 2023 forum, 2025 data reveal a return to large fossil-fuel and resource-backed deals.

https://greenfdc.org/china-belt-and-road-initiative-bri-investment-report-2025/

Chinese companies are now exporting to the African consumer markets

https://www.cnbc.com/2025/11/24/china-africa-expansion-shifts-infrastructure-resource-mining-consumer-goods-investment.html

A possible line of argument for an essay – Given China’s huge trade surplus (see the link below), it is vital that a significant proportion of these funds is recycled as investment back into the global economy. Countries may have doubts about the planning and effectiveness of particular BRI projects, overall management of the BRI, the environmental effects of the BRI, the risk of a debt-trap for poor countries and the potential export of the Chinese political model or its support for authoritarian regimes, a kind of neocolonialism. However, while all this calls for caution, careful monitoring and oversight and alternative investors and investment initiatives (the US and the EU?) or perhaps partnering China in these investments, blanket oppostion would seem to be unlikely to succeed. The EU is pushing to make sure that trade deals with China are fair while moving to protecting sectors it considers crucial for its economic and geopolitical security. A similar approach will need to be adopted by countries which have joined or are joining the BRI. Cauious cooperation and negotiation after careful assessment of the risks involved.

https://www.reuters.com/world/china/chinas-trade-ends-2025-with-record-trillion-dollar-surplus-despite-trump-tariffs-2026-01-14/#:~:text=BEIJING%2C%20Jan%2014%20(Reuters),pressure%20from%20the%20Trump%20administration.

https://www.aljazeera.com/news/2025/5/28/tidal-wave-how-75-nations-face-chinese-debt-crisis-in-2025

https://www.reuters.com/world/china/eu-toughen-trade-stance-china-germany-pivots-2025-11-20/

Italy’s “golden power” rules

https://www.atlanticcouncil.org/in-depth-research-reports/report/italys-policy-on-china-the-belt-and-road-gamble-and-its-aftermath/ very clear

How is China's role within the international order evolving in 2026?

How are relations between China and Italy, the EU and the liberal democratic world in general evolving? And with the Global South?

Based on reports and assessments from European sources (such as the European Parliament, the OECD, Freedom House, and Human Rights Watch), here is an overview of some positive and negative aspects regarding China in 2026 across economics, politics, and human rights.

Economics

Positive Aspects

Growth Target and Technological Advance: China’s GDP is on track to hit the official 2026 target of 4.5% to 5% growth (growing around 4.6% in the first three quarters of the year), supported by strong performance in artificial intelligence (AI), advanced manufacturing, and tech exports. It has made substantial strides toward self-reliance in AI, advanced robotics, semiconductors, and green technologies.
Green Energy Transition: China continues to log record investments and scale-ups in renewable energy, solar power, electric vehicles, and high-tech manufacturing capacity. China is the world's largest annual emitter of greenhouse gases—accounting for roughly 28% to 31% of global emissions—more than the United States and the European Union combined, while simultaneously leading the world in green energy investments, renewable capacity, and electric vehicle production. China leads the world in renewable energy investments, pouring hundreds of billions of dollars annually into clean tech—far surpassing the U.S. and the European Union. At the same time, China produces the vast majority of the world's solar panels, wind turbines, electric vehicles (EVs), and lithium-ion batteries. A s regards financing for domestic green sector, the country has established massive green lending and green bond markets.
Industrial Resilience: The country has maintained strong export competitiveness and supply-chain dominance despite global trade tariffs and restrictions.
Supply Chain Indispensability: The EU Chamber of Commerce Position Paper 2026/2027 highlights that 94% of European firms still consider China a vital sourcing centre due to unmatched production efficiencies.

Negative Aspects

Property Sector and Domestic Demand: Real estate investment continues to contract, and private domestic consumption remains weak due to high precautionary household savings and a fragile labor market. In 2026, China’s labor market presents a tale of two realities: the overall urban unemployment rate remains stable at a managed 5.2%, yet the country is grappling with a severe structural youth unemployment crisis and a rapidly expanding ‘gig’ economy. The gig economy is a labor market dominated by short-term contracts, freelance assignments, and temporary tasks rather than traditional long-term employment
Industrial Overcapacity and Trade Tensions: State-driven export promotion and massive overcapacities in sectors like automobiles and electrical machinery are causing wide current account surpluses, triggering trade friction and protective scrutiny from the European Union. European institutions heavily critique China's "biased growth model". Excessive state subsidies have triggered immense overcapacity in Electric Vehicles (EVs), lithium batteries, and machinery, leading to trade friction as China dumps excess inventory globally. The economy faces persistent deflationary trends and lower price levels There is a government campaign to stop self-defeating, "race-to-the-bottom" domestic price wars.
Falling Foreign Investment (FDI): Cautious sentiment persists. The European Chamber recorded a historic low in long-term investment sentiment, with only 53% of European firms ranking China as a top-three investment destination due to regulatory ambiguity and geopolitical risks.

Politics

Positive Aspects

Institutional Planning & Control: Under the 15th Five-Year Plan framework launched in 2026, the Chinese Communist Party (CCP) maintains high macro-level steering capacity, strategic investment focus, and administrative continuity.
Global Diplomatic Engagement: Beijing actively pursues multipolar diplomacy, expanding influence across the Global South and maintaining structured technical dialogues with European institutions. It has an expanding diplomatic footprint in the Global South andEuropean assessments recognize Beijing's growing political capital in non-Western nations. Through "South-South cooperation," China's infrastructure projects and green energy exports have won support across Latin America, Africa, and Southeast Asia.
How China is seen in the Global South: However, in many Global South nations, there is a noticeable gap between elite government alignment with Beijing and grassroots public skepticism. While political leaders often welcome Chinese capital, local populations frequently worry about sovereignty, labor conditions, and economic fairness.

For example, in central Asia (e.g., Kyrgyzstan, Kazakhstan) governments are deeply integrated into China's Belt and Road Initiative (BRI). Conversely, public surveys reveal widespread local anxiety over potential land transfers, national debt dependency, and the influx of foreign workers.

In some Southeast Asian states (e.g., The Philippines, Vietnam), while leaders periodically try to balance or deepen economic ties with Beijing to fund infrastructure, public opinion is highly negative. This is fueled primarily by ongoing territorial clashes in the South China Sea.

Rlations with specific cconomic partners also show a divergence of opinion (Pakistan, Zambia, the Solomon Islands) In Pakistan, the government remains one of China’s closest allies. However, domestic public backlash, protests, and occasional security threats against Chinese nationals highlight a disconnect regarding how the benefits of these projects are distributed locally.

Negative Aspects

Tightening Domestic Authoritarianism:: Xi Jinping’s regime exercises a tight monopoly over governance, purging high-level officials and centralizing power with minimal policy pluralism. Reports from European policy centers underscore that strict central planning, regulatory opacity, and the prioritized "military-civil fusion" continue to stifle basic personal freedoms and marginalize private enterprise in favor of state-owned tech champions.
Escalating Geopolitical Tensions: China's deep political and material support for Russia, coupled with assertive maneuvers in the South China Sea and Taiwan Strait, has alienated European capitals and raised tensions with some of its neighbours.
Systemic Rivalry with Europe: The European Parliament formally characterizes China as a systemic rival, pushing for a rigorous de-risking strategy, trade defense measures against unfair subsidies, and pushback against foreign interference and cyberattacks. According to European policy analysts, Brussels is shifting from a passive "de-risking" approach to an active economic defense strategy. By late 2026, the EU has introduced aggressive trade defense instruments, import surveillance, and investment curbs, explicitly pushed by France and Germany to defend local industries from Chinese competition.
Localized Social Unrest: Pervasive central planning and economic strain have given rise to localized civic and labor protests, though these are swiftly managed by state security.

Human Rights

Positive Aspects

Poverty and Livelihood Claims: Official state discourse and select international assessments note ongoing investments in basic public infrastructure and social welfare frameworks aimed at poverty reduction and public livelihood development. According to the World Bank, China has lifted close to 800 million people out of extreme poverty over a span of about 40 years (starting with the economic reforms of 1978).

Negative Aspects

Severe Repression of Dissent: According to Human Rights Watch (2026 Report) and Freedom House (2026 Report), China scores near the bottom globally for political rights and civil liberties. Authorities systematically suppress freedom of expression, religion, association, and peaceful assembly.
Tibet, Xinjiang, and Hong Kong: Forced assimilation policies and mass imprisonment continue against Uyghurs and Tibetans. In Hong Kong, national security laws are actively used to criminalize peaceful dissent and convict high-profile figures like Jimmy Lai.
Crackdown on Civil Society: Human rights defenders, independent lawyers, and journalists face continuous harassment, arbitrary detention and censorship. China pursues the global export of digital surveillance and the strengthening of the ‘Great Firewall’, which is the combined legislative and technological system operated by the Chinese government to regulate domestic internet traffic and block foreign websites or services.

The EU’s position was clearly set out in December 2023 by the European External Action Service (EEAS), which is the European Union’s diplomatic service.

‘The EU sees China as a partner for cooperation, an economic competitor and a systemic rival. However, EU-China relations have become increasingly complex due to a growing number of irritants. China has become less open to the world and more repressive at home, while taking a more assertive posture abroad, resorting to economic coercion, boycotts of European goods, and export controls on critical raw materials.’

https://www.eeas.europa.eu/eeas/eu-china-relations-factsheet_en

Italy’s Stance towards China: in 2026 this centers on a dual strategy of economic re-engagement and risk mitigation, following Rome's exit from Beijing’s Belt and Road Initiative (BRI) at the end of 2024.

Key Pillars of Italy's Approach

Revitalized Strategic Partnership: Despite leaving the BRI, the Meloni government has worked to re-energize the 2004 Italy-China Strategic Partnership through high-level visits (including Foreign Minister Antonio Tajani's trip to Beijing) and targeted action plans focused on Made in Italy exports, fashion, machinery, and pharmaceuticals.
Bilateral Trade and Rebalancing: China remains Italy’s top trading partner in Asia, with bilateral trade exceeding $70–75 billion annually. However, Rome is actively pushing to reduce a wide Chinese trade surplus ($51 billion in Chinese exports to Italy versus $25 billion in Italian exports in 2025).
New Double Taxation Agreement: A modernized bilateral tax treaty between Italy and China officially entered into force on January 1, 2026, updating the previous 1986 agreement to streamline cross-border investment rules.
Institutional Dialogue: In July 2026, the Italian Parliament re-established the Parliamentary Commission for Italian-Chinese Cooperation after a five-year hiatus to manage legislative and diplomatic exchanges.
Alignment with European Union Frameworks: Rome maintains a pragmatic line that balances commercial ties with EU-level security concerns, supporting broader European discussions on industrial protection, clean-energy transition collaboration, and supply chain resilience.