China Threatens Retaliation Over EU's Green-Tech Investment Restrictions

China has warned the European Union of potential retaliatory measures in response to the proposed Industrial Accelerator Act, which imposes strict local-content requirements and investment barriers across key green-technology sectors including electric vehicles, batteries, photovoltaics, and raw materials. The dispute marks a significant escalation in trade tensions between the two economies and threatens to disrupt Chinese manufacturers' expansion plans in Europe.

The Industrial Accelerator Act, unveiled in March 2026, mandates an "EU-made first" procurement policy and requires prescreening of investments exceeding €100 million from high-capacity nations like China. The legislation also imposes conditions such as 50 percent local staffing requirements and caps foreign equity ownership at 49 percent. The EU aims to raise its manufacturing sector's contribution to GDP from 14.3 percent in 2024 to 20 percent by 2035, but China contends these measures violate WTO principles and discriminate against foreign investors.

The China Chamber of Commerce to the EU has formally urged the bloc to ease the restrictions and relax local-content requirements through official feedback to the European Commission. Major Chinese automakers, including BYD, Chery, XPeng, Guangzhou Automobile Group, and Zhejiang Leapmotor, have accelerated plans to establish local production capacity in Europe following the EU's imposition of anti-subsidy tariffs on Chinese-made electric vehicles in October 2024. These tariffs incentivized Chinese manufacturers to bypass trade barriers by manufacturing locally, but the proposed Industrial Accelerator Act threatens to further complicate these strategies.

Industry analysts note that while local research and development, staffing, and procurement requirements may be manageable, equity caps and mandatory technology transfer provisions present significant challenges for Chinese companies. According to Roland Berger consulting firm, although China remains committed to European expansion due to market scale, the EU may moderate some provisions in response to backlash. The dispute highlights deepening friction between the two economic blocs and could reshape investment dynamics in Europe's critical green-technology sectors.