The factory on the front line of Europe’s economic battle with China

I n the Flemish market town of Tienen, Citribel’s fermentation vats have produced citric acid for Europe’s food, pharmaceutical and cleaning industries since 1929. Nearly 8,000km away in China ’s eastern province of Shandong, a cluster of newer producers has helped turn the same commodity into a test of whether Europe can still defend its basic industrial base. Built with Belgian know-how and Italian refinery expertise nearly a century ago, Citribel still stands as a testament to European industrial ingenuity. But chief executive Joris Merckx says it now faces an existential threat from subsidised Chinese competition that has driven prices below levels European plants can sustain. “It’s a matter of our survival. We innovate on side-products, but we have been making losses for the last three years, so this cannot go on forever. It’s just a matter of time and we all disappear,” Merckx said. Citribel’s plight is echoed across Europe’s bulk chemical industry, which has seen a rash of plant closures in recent years, raising questions about how it can survive in the face of intensifying price competition from Chinese rivals. The chemical industry is a textbook example of how Chinese companies as a group come to dominate whole sectors through Beijing’s industrial policy and generous subsidies – as well as support from local authorities in China. This combines with vicious competition between Chinese companies for market share to put foreign producers that have less government backing out of business. The EU first imposed protective anti-dumping duties of up to 42 per cent on citric acid in 2009, but they are much lower than the US rate of 156 per cent. [ Amid a wall of blue tote bags, China’s vaulting AI ambitions come into view Opens in new window ] Since the pandemic and Russia’s full-scale Ukraine invasion, competition from China has become unbearable, analysts said, due to a combination of factors in both markets. Sylvie Lemoine, deputy director general of the European Chemical Industry Council (Cefic), said Europe had since been wrestling with a toxic combination of higher energy prices, green taxes, soft demand at home – all at a time when Chinese production has surged. “We are in a time of polycrisis,” she said, noting that European industry generally suffered from a lack of competitiveness. “We need to address unfair practices with China. Where trade is fair we should be open, where it’s unfair, we have the right to defend ourselves and we need to find this balance.” The situation for the bulk chemicals industry has become so severe that some analysts now question whether Chinese non-market practices – subsidised finance, tax breaks, grants and loans – mean that the industry’s traditional boom-and-bust demand cycles are a thing of the past. Analysts at Barclays warned in a note to investors last year that the industry was entering a new paradigm where “non-traditional economic incentives are disrupting the historical cycle precedent”. [ Ireland’s EU presidency an ‘opportunity’ to safeguard pharma’s future, says industry group Opens in new window ] The origin of Citribel’s China challenge can be found in the city of Weifang in Shandong where China’s citric acid industry is concentrated. The growth of the cluster of producers around the city illustrates how the country’s industrial policy can lead to overcapacity and domination of global industries. China’s output of citric acid rose from just over 1 million tonnes in 2012 to nearly 2.2 million tonnes in 2025, according to industrial database Zhiyan Consulting, with almost 90 per cent of this produced by six companies, four of them from Shandong, including industry leader Weifang Ensign Industry. The accounts of Weifang Ensign reveal how important government subsidies are to its profits in an industry that has continued to add capacity despite years of falling margins. The company reported a 77 per cent plunge in net profit in 2025 when several one-off subsidies given the previous year were not repeated. These had included an “enterprise development” subsidy, a “high-quality development fund” and a “corporate contribution award”. Weifang Ensign did not respond to a request for comment. Although Beijing announced it was removing export tax breaks from 249 industrial products in April, Citric acid continues to benefit from a 13 per cent export tax rebate, incentivising producers to ship more to foreign markets, thereby propping up the domestic sector. The battle among China’s chemicals industry companies mirrors that of other sectors such as solar panels, with producers increasing capacity regardless of demand to win market share. In commodity chemicals, the biggest company wins with larger scale meaning lower costs. “Even if they are not making enough money, still they believe it’s a good opportunity for them to consolidate the market and to take more market share so that when the market becomes better, they will make even more money,” said Ivy Sun, who leads China chemicals research at consulting firm Roland Berger. The pressure on European industry has fuelled demands for tougher action against Beijing’s trade policies, with record numbers of requests for the European Commission to impose anti-dumping duties to protect the sector since 2023. Belgium’s prime minister Bart De Wever warned in March that China was evolving “from partner and competitor to a systemic rival through state-driven overcapacity”, calling on the commission to take tougher action. Back in Tienen the consequences of the trade battle with China can be seen in reduced production and furloughed staff. Merckx says the Citribel plant, one of only two remaining citric acid factories in Europe, has been running at 60 per cent capacity, stockpiling products in the hope that prices will pick up. Chinese citric exports to the EU increased 50 per cent between 2019 and 2025. Over that period Citribel had to raise prices 50 per cent as its own costs soared, while China’s export price decreased 6 per cent, according to market data cited by Citribel. “The Chinese are selling their final product in Europe at around €1,000 per tonne, which is 40 to 50 per cent below my cost price. On average we have 37 per cent anti-dumping duties, which is just not high enough,” he said. Tienen’s mayor, Jonathan Holslag, who in 2015 served as a policy adviser to former EU commissioner Frans Timmermans, said the debate about Chinese subsidies and overcapacity had been running for years, but Europe had failed to act to protect itself, unlike the US. “This situation has been 20 years in the making ... Citric acid is a good example. Chinese production capacity has been growing for a long time but growth has been stellar in the last 10 years,” he said. The situation has been caused by successive five-year plans – Beijing’s blueprints for everything from the economy and trade to culture – but in Europe the result has been a vicious circle of decline. A report by Cefic found that investment in the European chemicals sector fell 80 per cent in 2025, with factory closures running at six times the rate of three years ago. Cefic’s Lemoine said China’s approach to base chemicals had left the industry watching closely whether China was preparing to move into the more advanced “speciality” chemical market, where the EU still retains an advantage. “The latest [Chinese] five-year plan talks of moving to ‘high-end transformation’. They have ramped up production in base chemicals, so the next worry is ‘will they go for specialities?’,” she said. However, analysts said Chinese companies’ ability to collectively build a controlling market position was not translating into monopoly pricing power. Analysis by the Center for Strategic and International Studies found that Chinese firms in clean energy and many other sectors were not exercising monopoly power to raise prices. “This also seems unlikely in the future as it would require the government to force closure of large swathes of existing capacity,” said Michael Davidson, senior associate in Chinese business and economics at CSIS. Citribel’s Merckx said the greater danger to Europe would be if Beijing suddenly decided to choke off supplies of vital commodities or resources – as it did with rare earths in its trade war against US president Donald Trump last year. “If China says ‘no citric acid any more’ then the shelves will very quickly be empty,” he said. – Copyright The Financial Times Limited 2026