The overlap between Danish and Chinese trade advantages has increased from 37% to 48% over the past 25 years, but Danish export specializations have proved more resilient than those of many European peers, according to EIFO's analysis "Competing with China's technological rise"
State-backed industrial policies have driven China into high-tech sectors, and the country is moving beyond its traditional low-cost export model. Between 2004 and 2024, the share of China's trade advantages derived from high-technology products increased from 15% to 21%. Medium- and high-technology products now account for almost 90% of its trade advantages. This is shown in an analysis by EIFO.
The shift is even more pronounced in R&D. Companies with high R&D intensity accounted for 33% of Chinese corporate R&D in 2004. By 2024, their share had risen to 57%. China is thus moving toward Denmark in the composition of corporate R&D, although Denmark still has a substantially larger concentration of high-R&D-intensity companies. Adjusted for purchasing power parity, China has also overtaken the EU in total R&D spending.
The development is also visible in trade. The overlap between Danish and Chinese trade advantages has increased from 37% to 48% over the past 25 years. According to the analysis, Danish companies will increasingly face Chinese competitors with growing technological capabilities.
The first China Shock, following China's WTO accession, benefited export-oriented economies such as Germany in particular. The second is turning Chinese companies into more direct competitors to established European producers. From around the turn of the millennium to today, the share of product codes in which Germany and China share trade advantages has risen from 28% to 45%. The value of these overlapping products has increased from 11% to 25% of German exports. Denmark's value-weighted overlap with China, by contrast, has been broadly flat since 2016.
According to the analysis, this is associated with Denmark competing less on scale and more on specialized technology, know-how and strong market positions. This applies particularly to wind energy, industrial enzymes, pharmaceuticals, food and agriculture, and flow control, where comparative advantages have remained stable over the past decade. In these industries, accumulated know-how, regulation and long-term customer relationships create barriers to entry that are difficult to replicate quickly.
The difference is also reflected in the markets each country serves. Danish exports are disproportionately directed towards upper-middle- and high-income markets, where customers place a premium on quality, advanced technology and reliable service. Chinese exports are more concentrated in lower-income markets. In wind energy, Danish manufacturers such as Vestas lead installations across Europe and North America.
Danish companies also stand out on innovation. They invest 6% of sales in R&D, compared with 4% in China. They also lead in foreign patent applications, which are more costly and typically reflect innovations with global market potential, while Chinese companies file most patents domestically.
According to the analysis, Denmark's advantages are defensible but should not be viewed as permanent barriers. The solar industry shows how a cost advantage can become self-reinforcing. European manufacturers were technological leaders in the 2000s, but Chinese manufacturers expanded production and R&D, supported by industrial policy and access to financing. The resulting oversupply caused panel prices to fall by around 70%, and Chinese manufacturers emerged as dominant global producers.
China is likely to strengthen its capabilities in Danish niches over time as well. Its growth in foreign patenting indicates that the lead is gradually narrowing. At the same time, Danish exports in several niches rely on a few key companies.
Denmark must therefore sustain its technological depth and differentiation. The analysis points to four priorities: defending the segments where differentiation matters, continuing to invest in frontier innovation, converting innovation into global commercial advantage and capturing more value beyond the product.
Explore the figures, methodology and conclusions in the full analysis.