In record heat, a warming world has come to rely on China to stay cool

By Stephanie Yang, CNN

Hong Kong (CNN) — With wildfires blazing and temperatures hitting record highs in Europe, one China-made product has never been hotter: air-conditioners.

Europeans, who have been slower to adopt AC than those living in other parts of the world, are lining up outside stores and driving long distances in the hopes of securing an AC unit as blistering summer temperatures in some areas surge past 100 degrees Fahrenheit.

Major Chinese brands Midea, Gree and Haier are reporting AC higher sales overseas, just as leaders in countries such as France, Germany and Belgium are threatening to impose tariffs on Chinese imports, which they say are damaging their own industries.

While air conditioning accounts for a small portion of Chinese exports to the EU, China has seized on the surge in sales as evidence that European consumers need Chinese products.

A column recently published by the official state-run news agency Xinhua criticized European policymakers for ignoring the needs of consumers, titled: “The air conditioner paradox: Europe is too hot for tariffs on China.”

“Blocking Chinese ACs won’t fix Europe’s problems –– it will only make life harder for ordinary people,” the author of the op-ed wrote.

The EU and China will hold discussions over the next few months to address the record trade imbalance of nearly 360 billion euros, or about $406 billion, as of last year. The gap has widened in recent years as China has ramped up exports, particularly of electric and hybrid cars that threaten to displace Europe’s biggest auto brands.

“It makes trade negotiations extremely difficult,” said Cameron Johnson, a supply chain expert and senior partner at Tidalwave Solutions, a Shanghai-based consultancy.

“If you’re a government, you cannot tell people, ‘Sorry, you can’t have air conditioning because we don’t want Chinese overcapacity.’”

‘Too hot for tariffs’

Other parts of the world have come to rely on China for air conditioning as well. In the US, where “heat domes” have led to extreme heat warnings in the south and central regions, Chinese brands account for 50% of the market, according to Euromonitor International, a market intelligence company. Globally, that figure reached 65% last year, the firm said.

Veronika Kandusova, global insight manager for consumer appliances at Euromonitor International, expects that proportion to increase alongside global temperatures. Chinese brands were able to capitalize on high demand this year, especially in Europe, thanks to flexible supply chains that can rapidly develop new, localized products.

European consumers have lagged behind the rest of the world in adopting AC, due to high energy costs, expensive installation fees and restrictions on retrofitting the continent’s older buildings. In the past, summers have not been hot enough to justify the trouble for most homes.

The climate crisis is now changing that.

Midea Group, one of China’s largest home appliance brands, designed its PortaSplitAC unit specifically for Europe by making it portable, quiet and low enough to keep from blocking European windows. The model has sold more than 200,000 units this year, doubling year-on-year, the company said.

“European home appliance markets, long dominated by Bosch, Electrolux, Miele, and other established Western brands by default, are opening competitive gaps that Chinese companies are structurally positioned to fill,” the research firm EqualOcean wrote in a blog post last month. “Midea’s PortaSplit is the product that crystallizes the shift.”

Those advantages translate to many other industries that could give China more sway in global trade, said Johnson of Tidalwave Solutions.

“This is just the beginning,” he said. “As inflation starts to gain hold in Europe and in the States, people don’t want to pay more for products. So what do you do? Well, you have to have some Chinese stuff.”

Jens Eskelund, president of the European Union Chamber of Commerce in China, said that European countries are more focused on addressing specific strategic segments and Chinese industrial policies than broadly inhibiting Chinese imports.

“The EU is neither looking for complete balance — in the sense that every euro of goods imported must correspond to a euro of goods exported — nor to reduce its reliance on China for more widely available household appliances,” he said.

Seeking hotter markets

China also needs new markets like Europe. Facing a housing slump and declining consumption at home, China has ramped up exports to other nations to buttress slowing economic growth. China ended last year with a record trade surplus of $1.2 trillion.

Even with rising exports, China’s reported second-quarter GDP was the lowest in more than three years.

Much of China’s recent export strength is driven by high-tech goods like batteries, electric cars and solar. These have become known as the “new three” categories for export growth, as the “old three” –– clothing, furniture, and home appliances –– have tapered.

As its summers grow hotter, Europe offers Chinese appliance makers a potential renaissance.

Europe has the world’s lowest penetration rates for air conditioning, said Denis Depoux, global managing director at the consultancy Roland Berger, averaging about 20%. That’s compared to 90% penetration in the US, where Chinese exports would also face tariffs.

“Europe is the prize,” he said. “If I am a Chinese manufacturer of air conditioning units, Europe is a very attractive market. It’s growing demand, it’s new, it’s affluent, margins are higher.”

According to Chinese media, some regions like China’s eastern Shandong province have received government support to boost manufacturing of cooling products and other home appliances this year.

Korean and Japanese appliance makers are also benefiting from booming European demand. Meanwhile, University of Michigan economics professor Chris Douglas argued in an op-ed this month that the state of Michigan should manufacture air conditioners for Europe.

However, the seasonal nature of cooling demand will limit market opportunities as temperatures eventually ease.

“In two months people will have forgotten that air conditioning was needed during the summer, but it will come again,” Depoux said. “Is it a meaningful, sustainable opportunity? I’m not so sure.”

One sourcing agent in China was already encouraging retailers to stock up for next year, in a marketing video published to WeChat, China’s popular social messaging app, titled, “Europe’s AC Gold Rush! Print Cash From The Heatwave.”

“Secure your market position before the 2027 madness begins,” she said, twirling and pointing to a room full of portable fans and coolers.

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