The Brief

Anthony Whelan, who leads the European Commission’s competition directorate, said Brussels is more willing to consider large corporate mergers that could support investment, innovation or security of supply, while helping European firms compete with American and Chinese rivals. He said companies should set out the benefits of proposed combinations themselves. The Commission published revised merger guidelines earlier this year as pressure grew for a more competitiveness-focused approach to European consolidation. Whelan said Brussels would look further ahead when assessing deals, including whether combining companies could improve access to constrained inputs, increase investment capacity or support innovation in capital-intensive sectors. He also said the change does not amount to preferential treatment for European companies. On AI, he described parts of the market as oligopolistic and said the Commission remained focused on lowering barriers to entry and policing conduct around the wider ecosystem.

The operative change is the type of evidence Brussels says it is willing to consider. Companies can now put greater weight on forward-looking claims about investment, innovation and access to constrained inputs, even though those benefits cannot be observed when the merger is assessed. That gives applicants more scope to defend present-day concentration using projected future gains. The commercial effect depends on how much weight regulators eventually give those projections against measurable evidence such as market share, price effects and current competitive overlap.

Large European companies gain a wider route through which to justify consolidation. The harder position belongs to smaller rivals in capital-intensive sectors such as AI. A larger competitor can now argue that combining resources will improve its ability to finance innovation or secure inputs, while the smaller firm still faces the resulting increase in market concentration. The tension is strongest where Brussels simultaneously wants lower entry barriers and is prepared to accept scale as a reason supporting a merger.

The real test will appear in published merger decisions rather than speeches. Over the next twelve months, watch for a contested case where projected gains in investment, innovation or supply security materially outweigh measurable concentration in the Commission’s reasoning. If that happens, the policy shift is affecting what clears review. If contested cases continue to turn mainly on market structure and remedies, the change will have altered the language around mergers more than the standard applied to them.

China’s exports rose 25% year on year in August in US dollar terms, accelerating from 23.9% in July. Imports rose 28.2%. Across the first eight months of the year, high-tech product exports increased 42.9% in value. Semiconductor export values more than doubled while volumes rose 4.1%. Car exports increased by more than 50% in both value and volume. The trade surplus reached $119.09bn in August, with the total for the first eight months at $805.51bn. Exports to the US rose 34.4%, while imports from the US increased 17.8%. Growth slowed to 4.3% in the second quarter, with industrial output, retail sales and fixed-asset investment weakening as the property downturn continued. Beijing is targeting growth of 4.5% to 5% this year and has introduced an 800bn yuan infrastructure financing tool.

Semiconductor export values more than doubled while volumes rose only 4.1%. That means the average value of each unit shipped rose sharply, with most of the export increase coming from price rather than a comparable expansion in physical output. Cars show the opposite pattern, with value and volume both increasing strongly. The semiconductor figures therefore do not describe a large increase in units leaving Chinese factories. They describe an export line whose current strength depends heavily on elevated pricing.

Exporters benefit while weaker domestic demand remains easier for policymakers to tolerate. Strong external earnings give Beijing more room to delay larger measures aimed directly at household consumption, even as retail sales and property remain weak. The household therefore sits further from the immediate benefit of the export surge. Infrastructure support continues through fixed-asset investment, while the income and consumption side of the economy remains less directly supported.

The semiconductor export line becomes vulnerable once the comparison base catches up with today’s elevated prices. Over the next two quarters, expect high-tech export value growth to slow sharply without an equivalent decline in shipment volumes. That would show the deceleration is being driven by arithmetic rather than a sudden collapse in demand. This view would be wrong if semiconductor volumes begin rising materially into double digits, showing that physical expansion has started to replace price as the main driver.

The joint future combat air system pursued by France and Germany since 2018 was cancelled in June after disagreements between Dassault Aviation and Airbus Defence and Space over leadership and aircraft requirements. Safran has since said it will end its joint engine effort with Germany’s MTU Aero Engines. France now appears likely to pursue its own programme, while Germany is exploring possible involvement in the rival GCAP project led by the UK, Italy and Japan. GCAP is being developed through the Edgewing joint venture and targets a first flight in 2035. Canada joined as an observer in July and Saudi Arabia is also seeking involvement. Leonardo chief executive Lorenzo Mariani said Germany could strengthen the programme financially, while warning that another core partner could increase delay risk. Airbus Defence and Space has said it would want meaningful workshare and leadership if it joined. Rolls-Royce currently occupies the engine position and has not committed to sharing propulsion work with MTU.

Germany brings GCAP something its existing partners want: additional funding and another potential national order book. Joining also creates a division-of-work problem. The programme already has incumbent companies across aircraft, systems and propulsion, so giving Germany meaningful industrial participation means either reopening allocations already made or admitting Germany mainly as a buyer and financier. The value of German entry therefore depends on whether the extra demand and funding outweigh the disruption caused by redistributing work.

Germany gains a route back into a major European fighter programme, but the most exposed company is MTU Aero Engines. Safran’s withdrawal removes MTU from the French route, while propulsion work inside GCAP is already held by Rolls-Royce. Airbus can negotiate for airframe and systems work if Germany enters, but MTU has no equivalent guaranteed position. German participation could therefore strengthen the programme financially while leaving one of Germany’s major aerospace suppliers outside its most valuable workstream.

The condition to watch is whether any German entry to GCAP includes propulsion work from the outset. Our position is that a deal reached within the next twelve months is more likely to settle airframe and systems participation while leaving engine work unchanged, because propulsion already has an incumbent supplier and reopening that allocation adds another layer of negotiation. This view would be wrong if Germany joins with MTU formally included in the engine workshare from day one. That would show the existing partners value Germany’s financial and industrial contribution enough to reopen one of the programme’s most settled areas.