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

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

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ReportsSubscriber RewardsCompetitionsNewslettersWeather ForecastBusinessThe factory on the front line of Europe’s

economic battle with ChinaSurvival of Citribel’s citric acid plant in Belgium is a test of whether the EU can still

defend its basic industrial baseEuropean industrial plants face increased competition from China. Photograph: Getty

Images/iStockphoto Peter FosterJoe LeahyWed Jul 22 2026 - 06:00 • 6 MIN READIn 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.READ MOREWhat top CEO pay and gender pay gap reporting

tell us about Irish businessAI start-up targets billions wasted on cloud computingSamsung bets even bigger on foldable

phonesAI is turning everything into a software project – whether worthwhile or not“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 viewOpens 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 groupOpens 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

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