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https://www.zaobao.com.sg/news/china/story20260626-9266208?utm_source=android-share&utm_medium=app
Lianhe Zaobao
June 26, 2026
By Han Yonghong
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At a time when trade relations between China and Europe are highly strained, Chinese Premier Li Qiang used his opening speech at the Summer Davos Forum on Wednesday (June 24) to rebut the increasingly popular "China Shock 2.0" narrative that has gained momentum in recent months, while proposing "China Opportunity 2.0" as a counterpoint. In particular, Li attributed China's achievements in innovation first and foremost to society and its enterprises, lavishly praising Chinese companies by saying that "Chinese enterprises are truly remarkable." His deep appreciation for businesses was evident throughout his remarks, revealing a less commonly seen aspect of the relationship between China's leadership and its enterprises.
Known for his low-profile and pragmatic style, Li departed from his prepared remarks several times that day to explicitly reject the "China Shock 2.0" narrative that has become increasingly prevalent in Europe. He criticized it as an "unfriendly and untruthful" argument put forward by people who have become anxious about China's technological and industrial innovation.
Li explained that China's economy has maintained steady and healthy development because of two key factors: a stable environment and innovation-driven growth. As for the former, he said there was no need to elaborate further. Regarding the latter, he emphasized that "people may not fully understand the tremendous effort and long-term perseverance behind it."
To explain this, he offered "three statements."
Li's first statement was that China's innovation has been achieved through painstakingly "strengthening its internal capabilities." He repeated the phrase "strengthening internal capabilities" four times. These "internal capabilities" include China's average annual 10 percent increase in nationwide research and development spending between 2021 and 2025, with the overall scale of investment remaining the world's second largest. Meanwhile, the share of spending devoted to basic research exceeded 7 percent last year, reaching a record high.
He stressed, "I have to say, Chinese enterprises are truly remarkable." Many industry-leading companies have endured the business pressures brought about by long development cycles and heavy R&D investment. Some have faced massive losses during certain periods or continuous unfair external suppression, yet none of them wavered. He singled out Huawei as "perhaps the most typical example." Despite being subjected to long-term external restrictions, Huawei invested as much as one trillion yuan (S$190 billion) in research and development over the past decade, ultimately achieving its current world-class technological strength.
Li's second statement was that China's innovation has been "put into use" across every sector of the economy. Thanks to China's complete industrial system and vast market, any worthwhile technological achievement can quickly be transformed into an actual product, while any niche product can become a major business and industry in a market of more than 1.4 billion people. New technologies are continuously refined and upgraded through large-scale application. Li argued that this, rather than government subsidies, is the key to the competitiveness of Chinese products. In plain language, he remarked: "The Chinese government isn't that wealthy. We simply can't afford to subsidize everything."
His third statement was that China's innovation has been "nurtured" through the cultivation of a strong ecosystem. Only at this point did Li explicitly mention the government's role, including "building a diversified investment system led by enterprises, guided by the government, and participated in by society." He also highlighted ongoing institutional reforms and said that China would accelerate the construction of new power grids, computing networks, and next-generation communications networks.
Li's speech also reflected, indirectly, that under China's political system, innovative technology companies have ample room for development domestically and no longer necessarily need to expand overseas. Instead, international innovative enterprises might consider coming to China to "test and refine" their technologies.
As for the "China Shock 2.0" narrative that Li rebutted, it refers to the impact of China's technology products entering global markets on a massive scale since 2018. The term distinguishes this new wave from the original "China Shock" during the period from 2000 to 2007, following China's accession to the World Trade Organization, when inexpensive Chinese manufactured goods had a profound impact on the global economy. "China Shock 2.0" emerged in 2024, against the backdrop of China's record-breaking US$1.2 trillion trade surplus in 2025. Meanwhile, since the U.S.-China trade war began in 2018, the share of China's exports destined for the United States has fallen from nearly 20 percent to 11.1 percent last year. Large quantities of Chinese new energy vehicles, photovoltaic equipment, lithium batteries, and other products have since expanded into markets around the world, becoming a nightmare for European companies.
Under this pressure, German media have called on the European Union to introduce carefully designed tariff barriers to protect European businesses, restrict Chinese investment, and reduce dependence on China. Chinese media, meanwhile, argue that "China Shock 2.0" is essentially a Western propaganda tactic designed to shift blame. According to this view, Western politicians are deliberately manufacturing the narrative of a China threat, attributing their countries' economic weakness and employment problems entirely to China's industrial upgrading while concealing their own failures in governance.
Both sides have firmly held to their respective positions. The reality is that the intensity of "China Shock 2.0" is not greater than that of "China Shock 1.0." However, because China's exports now far exceed their scale of 20 years ago, this new wave involves far more critical technology industries and its impact is concentrated in a limited number of sectors, European companies naturally feel a much stronger sense of being "hit." Moreover, after years of intense "involution" competition, Chinese companies have driven prices down to cut-throat levels. Europe, meanwhile, has been struck this year by the dual impact of the Russia-Ukraine war and the Strait of Hormuz crisis, with rising energy and raw material costs nearly wiping out the profit margins of some European firms. Faced with the aggressive advance of Chinese companies, many have fallen into deep anxiety. Against this backdrop, German Chancellor Merz stated at last week's European Union summit that the renminbi is undervalued by 30 percent and proposed pressuring China to appreciate its currency through an arrangement similar to the Plaza Accord between the United States and Japan.
Is the "China Shock 2.0" narrative justified? From the perspective of affected companies, the sense of being impacted is certainly real. However, blaming China's exports entirely for the structural and industrial challenges confronting both the global economy and the European economy runs contrary to the facts. Countries around the world must also accept another reality: Chinese companies are no longer the inexperienced newcomers they once were. Head-to-head competition between Chinese and foreign enterprises will become increasingly unavoidable, and what we are seeing now is only the beginning. At the same time, China must also adopt concrete measures to rebalance its domestic economy by increasing household incomes to stimulate domestic demand, which remains a necessary step toward easing international trade tensions.
For now, however, China appears unlikely to yield under pressure from the European Union. Li Qiang's vigorous defense of Chinese companies and his forceful rebuttal of "China Shock 2.0" at the Summer Davos Forum itself sent a clear signal: if Europe launches a trade war against China, Beijing will certainly not hold back. Europe, for its part, does not appear willing to engage in a full-scale trade war with China. Nevertheless, with bilateral relations continuing to deteriorate, localized trade frictions have become unavoidable.
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