At a quick glance, China appears to be surging ahead in the green hydrogen race. It currently has over 125,000 tonnes per year of green hydrogen production capacity, according to the National Energy Administration (NEA), making it the global leader in terms of infrastructure scale. Major firms like Sinopec, LONGi, and Sungrow have rapidly used electrolysers, especially cost-competitive alkaline and PEM types, and slashed prices, making Chinese hydrogen gear potentially more than 30% cheaper than European counterparts.
But beneath the surface, the situation does seem more nuanced. Despite its leadership in the use of electrolysers, green hydrogen still only accounts for 0.34% of China’s total hydrogen output, while the vast majority still comes from fossil fuel-based sources such as coal gasification. The massive capacity figures are as much about signaling future ambition as they are about present-day impact. Still, the direction is clear: China is building the supply chain, scaling production, and positioning itself to stand on top in future decarbonized sectors like steel, ammonia, and long-haul transport.
In addition to that, China’s hydrogen development is entering what Beijing calls a “new stage of orderly development”, a pivot from chaotic early investment to a more centralised coordination effort, tech integration, and establishing norms & standards.
This progression closely resembles the trajectory of its solar and battery industries, which initially relied on government subsidies and market flooding but later consolidated under industrial policy to become globally dominant. 
Europe’s Dilemma
Europe, by contrast, continues to lead in research and early-stage innovation. EU initiatives like Horizon Europe and the Clean Hydrogen Partnership support cutting-edge projects in solid oxide electrolysers and anion exchange membranes (AEMs). Meanwhile, pilot plants in Germany, the Netherlands, and the Nordics are testing integrated hydrogen systems for steel, aviation, and heavy transport.
Yet the continent lags behind in scaling manufacturing and deploying infrastructure at pace. The EU’s Hydrogen Strategy envisions 10 million tonnes of domestic green hydrogen production by 2030, plus another 10 million tonnes imported. But as of 2024, most EU countries have deployed only small-scale electrolysers and remain deeply dependent on foreign technology and investment.
Meanwhile, Chinese firms are entering Europe’s hydrogen market with attractive offers: co‑investments, discounted equipment, and joint ventures (e.g., Hygreen in Andalusia, Envision in Spain, Guofu’s German JV with Siemens). Even if these partnerships help fill investment gaps, they also raise some concerns. If not carefully structured, the EU risks replicating the solar energy disaster, where Europe lost its once-thriving solar manufacturing industry and first-mover advantage back in 2010.
Back then, the sector collapsed under intense pressure from low-cost Chinese imports and as Chinese manufacturers rapidly scaled production and undercut prices. European solar firms then faced widespread factory closures and bankruptcy due to being unable to compete. The main factor behind this decline was a structural cost disadvantage: European producers operated at a 20-35% higher cost due to more expensive energy, labor, and capital. By 2022, the stark impact was palatable: over 95% of solar panels installed in the EU were imported from China, signaling the near-total erosion of Europe’s domestic manufacturing base. The case of Photowatt, a leading French solar firm, illustrates the situation quite well; once a symbol of national innovation, it now survives only through government support in the face of overwhelming Chinese market dominance.
What Europe Must Do
To avoid another industrial defeat, Europe must pivot from reaction to pro-action. This means treating green hydrogen as critical infrastructure, much like semiconductors, worthy of long-term industrial strategy, making the daunting first steps instead of pacing behind.
- Scale Domestic Manufacturing
Europe must prioritize building electrolyser gigafactories within its own borders. The European Hydrogen Bank, launched in 2022 as a financing instrument, run internally by European Commission services, with an initial €800 million, is a great step forward indeed. But even with the budget going up to €1 billion at the end of 2025, it will be wholly insufficient in the face of China’s multi-billion euro scale-ups. Public procurement mandates and government financial support will be necessary to create early demand and de-risk private investment.
- Protect and Deploy Innovation
Europe still leads in next-generation hydrogen technologies. Solid oxide systems from Germany, thin-film hydrogen sensors from the Netherlands, and low-iridium PEM stacks from Denmark could, in all honesty, be potential game-changers. These technologies must be developed from lab to market in a rapid timeframe, or else they fall behind. More importantly, however, might be their IP, which must be shielded through strong export controls, IP-sharing restrictions in joint ventures, especially, and government oversight of foreign investment.
- Manage China Collaboration with Strategic Guardrails
Engagement with China is inevitable, given its cost advantages and supply chain. However, Europe must set boundaries. Investment screening frameworks, such as the EU’s Foreign Direct Investment (FDI) Screening Regulation, should potentially be expanded to include hydrogen hardware and joint ventures as well as set clearer guidelines on tech transfer and cybersecurity protocols, which both prevent information leakage.
Hydrogen as Geopolitics
Green hydrogen is not only an energy resource, but could function as a foundation for reindustrialising economies in a more sustainable fashion. Whoever leads in hydrogen tech will shape the future of clean steel, synthetic fuels, green ammonia, and energy storage. As Canary Media recently highlighted, this is not only about volume but about value, since green hydrogen could be the pillar of tomorrow’s heavy tech industry.
China clearly sees this future already. It has begun exporting electrolyser systems to developing markets under its Belt and Road Initiative, expanding influence while securing demand. For Europe, ceding leadership in hydrogen would not only mean missing out on a substantial amount of economic value but would also further lessen EU independence for necessary goods.
A Newer and Greener Deal, Not a Green Surrender
The green hydrogen transition offers Europe a rare second chance. This could be an opportunity to lead in a decarbonised industry, restore energy sovereignty, and define global standards. But it will not win this race on innovation alone as the EU may have thought before. Manufacturing must be scaled, foreign partnerships should be managed wisely, and hydrogen has to be treated as both a product and a strategic asset.
China is building hydrogen capacity not just for today’s needs, but for tomorrow’s. Europe must do the same or risk finding itself once again at the mercy of an energy system it, despite innovations, does not have any control over.
