BRUSSELS—European leaders are rediscovering the appeal of giving the market’s invisible hand a helping hand in an effort to counter China’s state-backed capitalism.

Government intervention to help build corporate champions was Europe’s standard for the postwar decades but faded amid privatizations and deregulation starting in the 1980s. Now, Europe’s struggle to keep up with China’s government coordination of business and the economic might of the U.S. has prompted more European politicians to advocate interventionism.

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