European Union drafts solidarity fund to aid firms cutting China reliance

The European Union is preparing a new “solidarity instrument” aimed at supporting companies that diversify their supply chains away from China. The tool is intended to lessen dependence on critical raw materials and components sourced from China and to cushion any economic fallout from possible Chinese retaliation in a trade dispute.

The mechanism will require substantial financing at a time when member states are negotiating the EU’s multi‑year budget and seeking to curb public spending. It is part of a broader EU strategy that includes dialogue with Beijing, the use of safeguard measures and the Anti‑Coercion Instrument, which can impose tariff and non‑tariff countermeasures.

EU officials say the trade deficit with China has now exceeded €360 billion, affecting all member states. While China has shown willingness to increase EU imports, it remains reluctant to limit its own exports. The EU and China have set an October deadline for substantive progress, and Commission President Ursula von der Leyen has warned that the bloc will take decisive action if talks stall.