KEY TAKEAWAYSChinese employees are using European law to defend their working conditions: after being fired by the equipment manufacturer Xingyu, 107 young graduates alerted Mercedes-Benz and Volkswagen, its European clients.The European Union extends its legal power beyond its borders. With the regulation on foreign subsidies (FSR), Brussels can investigate Chinese companies benefiting from public support when they operate in the European market.Beijing and Brussels have entered a legal standoff with China seeking to prevent its companies from cooperating in European investigations while the EU uses access to its vast market as regulatory leverage.As Sino-European rivalry spills into the legal arena, law is emerging as an unlikely weapon in the European Union’s arsenal of power. Against Beijing, Brussels is wielding an expanding body of rules with extraterritorial reach, unsettling Chinese strategies and redrawing the boundaries of economic power.Two recent developments lay bare this clash of approaches. On September 1, China’s new Lawyers Law came into force, placing lawyers’ work firmly under the direction of the Chinese Communist Party (CCP). At the same time, German carmakers Mercedes-Benz and Volkswagen found themselves drawn into a complaint filed by employees of their Chinese supplier, Xingyu. Mercedes-Benz acknowledged receipt of the whistleblower report and pledged a thorough review; Volkswagen opened an investigation. Together, the contrast is striking: where Beijing seeks to subordinate the legal profession to the party, the EU is using legal rules to project power beyond its borders.When Chinese employees turn European law against their own employersThe Xingyu case shows how European law can become a weapon in the hands of Chinese workers themselves.In early July, Xingyu, China’s leading automotive lighting manufacturer, hired 440 fresh graduates at its plant in Changzhou, 200 kilometres from Shanghai. A month later, 107 had been laid off in a rarely brutal way with little compensation. According to the company’s official statement, this decision was due to “the industry’s sluggish economic situation”. The mass layoffs have set Chinese social media ablaze, and even the CCP’s mouthpiece, the People’s Daily, has condemned the company for having “trampled on social trust”.Unconvinced, the young recruits chose an unconventional route to challenge their dismissal. Rather than turn to domestic legal channels, they assembled a dossier of evidence: contracts, interview recordings, recruitment advertisements and internal documents. They translated the material into English themselves and mailed it straight to Xingyu’s European clients, namely Mercedes-Benz and Volkswagen, as well as to the Hong Kong Stock Exchange, where the company had filed for an IPO at the end of July.The significance of this move goes far beyond a workplace dispute. These young employees took their case across borders, seeking leverage not from Chinese judiciary mechanisms, but from the legal and reputational obligations facing their employer’s European customers, imposed by EU law. In doing so, they turned the global supply chain into a potential channel of accountability. This is the reach and the paradox of European legal power. Brussels cannot directly dictate how Chinese companies operate on their homeland, but it can act on both their business operations that are linked to the European market, as well as those of their European partners. By targeting the links that bind global value chains, EU law can travel far beyond the Union’s borders and become a source of leverage for people with little power at home.Nuctech: when Brussels brings Beijing to heelThe Nuctech case illustrates the reverse dynamic: European law reaching into Chinese business power from the top down. Nuctech, a Chinese company, state-owned, and global leader in security screening systems, has come under investigation by the European Commission under the Foreign Subsidies Regulation (FSR). Adopted in 2022 and in force since 2023, the FSR gives the Commission the power to scrutinise subsidies granted by non-EU governments to companies operating in the European market when those subsidies risk distorting competition.In April 2024, the Commission launched an ex officio procedure into Nuctech under the FSR and carried out unannounced inspections (dawn raids) at the company’s premises in Poland and the Netherlands. During the raids, investigators sought access, among other things, to employees’ e-mails stored on servers in China. Nuctech challenged the measures before the General Court of the European Union, seeking their suspension.In August 2024, the General Court dismissed Nuctech’s application for interim relief. In March 2025, the Court of Justice, hearing the case on appeal in proceedings for interim relief, upheld this rejection. The courts have not yet ruled on the substance of the case. But their interim rulings have already sent a clear message: a foreign company operating in the EU cannot easily shield itself from Commission investigators by invoking the restrictions imposed by its home country’s laws.The real clash erupted in 2026. On April 7, just days before the General Court was due to hear Nuctech’s case in Luxembourg, Beijing adopted measures aimed at countering what it called t he “inappropriate extraterritorial application of foreign laws and measures”. Then, on May 15, the Chinese Ministry of Justice escalated the confrontation, ordering “any organisation and any individual” not to cooperate with the EU’s investigation into Nuctech. Beijing denounced the EU’s action as both “abusive” and “erroneous”. The dispute had moved beyond a corporate investigation and thus directly brings into conflict two legal orders.The confrontation now boils down to a fundamental question: when European and Chinese law collide over the same company, whose rules will prevail?Brussels’ market power is making Beijing play by EU rulesThe EU may lack China’s demographic size, or its industrial capacities, but it has a powerful card to play: access to a market of 450 million consumers, among the world’s wealthiest. The FSR turns that market into a lever of power. Its logic is simple: companies seeking to do business in Europe must play by European rules, whatever the source of their funding.And this leverage is already having tangible effects. Since the FSR’s entry into force, Chinese multinationals have withdrawn from several European public procurement bids. China’s rail manufacturer CRRC pulled out of the Lisbon metro project, while Shanghai Electric abandoned a tender for a photovoltaic park in Romania. There is no ambiguity: access to the European market comes at a price and Brussels is prepared to enforce the terms.In early February, the European Commission opened an in-depth investigation into Goldwind, the wind power giant based in Xinjiang; in late May, it opened another against online retail giant JD.com, a candidate for the acquisition of German distributor Ceconomy. Beijing retaliated by dictating, on August 19, a second blocking measure, prohibiting any collaboration with the Brussels investigation into JD.com, once again in the name of “defending national sovereignty”.The battle lines are now drawn. Beijing tries to seal its data behind a sovereign firewall; Brussels holds the keys to the European market. Law has become a weapon of geopolitical combat, with each side testing the other’s red lines.For Chinese multinationals, the stakes are brutally concrete: how much are they willing to sacrifice to defy Brussels? Can they afford to lose access to a market that absorbs hundreds of billions of euros’ worth of Chinese goods every year?Xingyu has already delivered its answer and in dramatic fashion. Faced with the fallout, the lighting manufacturer made a spectacular U-turn: it apologised to its employees and offered them a substantially more generous severance package. The episode confirmed the EU’s leverage in Xingyu’s young employees’ action. Brussels did not need to dictate terms in the People’s Republic of China (PRC); pressure transmitted through the European market was enough to change a company’s behaviour.From subsidies to forced labour: how far will the extraterritorial power of European law go?If the FSR becomes a true sword of Damocles hanging over Chinese companies operating in Europe, the European Forced Labour Regulation (FLR) could soon target products manufactured outside the EU, particularly in the PRC, whenever they are destined for the European market.Adopted in 2024, the FLR will prohibit, starting December 14 2027, China from putting products made with forced labour on the European market, regardless of their origin. The Commission will thus be able to examine supply chains, from the importer down to the supplier, and even subcontractors located on the other side of the planet. Hence the nightmare for Chinese exporting firms: one of the potential Achilles’ heels of “Made in China” lies in the working conditions under which certain products are manufactured.Europe’s true revenge might not be to “defeat” the communist regime in production or exports. Rather, it would be to succeed in making its own rules a reference to which Chinese companies, like other non-EU companies, must submit.In this battle, the winner will not be the one that produces the most, but the one that dictates the rules. If the EU can make access to its own market conditional on compliance with its laws, Beijing will face a bitter truth: it may control how the world’s goods are made, but it cannot dictate the rules under which they are sold. A weekly e-mail in English featuring expertise from scholars and researchers. It provides an introduction to the diversity of research coming out of the continent and considers some of the key issues facing European countries. 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