The latest report from the European Chamber of Commerce in China reveals that China’s export control on critical materials has put some European companies in crisis, with over 70% of European businesses in China reconsidering their supply chain strategies. Experts analyze that European companies’ reliance on China has three levels of vulnerability, with “de-risking” shifting from a policy slogan to a survival strategy for businesses.
The report released by the European Chamber of Commerce on Wednesday (December 10) highlights that while China’s industrial clusters have made many global companies rely on its supply chains to stay competitive, recent geopolitical impacts have underscored the urgency to reduce reliance on a single country.
Chairman of the European Chamber of Commerce, Jens Eskelund, stated during a media briefing, “What we are seeing in terms of understanding the extent of reliance on supply chains may just be the tip of the iceberg.”
He emphasized the high level of dependency of European industries on China and posed the question, “Can we be sure that Europe can still produce toothpaste without sourcing raw materials from China?”
The report from the European Chamber of Commerce in China indicates that China’s export control on rare earths and critical materials has plunged European companies into crisis. Some companies reported production halts, resulting in losses amounting to millions of euros. Over the past two years, more than 70% of European enterprises in China have re-evaluated their supply chain strategies.
The Chamber stated last week that due to Beijing’s export control policies, one-third of its member companies are considering shifting sourcing away from China.
Representing EU companies based in China, the European Chamber of Commerce has over 1800 members from the 27 EU member states, with branches in various cities in China, serving as a crucial voice and platform for European businesses in China.
An analyst from the Institute of Network Security and Decision Simulation at the Taiwan National Defense Research Institute pointed out that the strongest signal released by the European Chamber of Commerce report is that “de-risking has shifted from a mere slogan to a survival strategy forced upon European businesses.”
He interpreted supply chain vulnerabilities from three perspectives:
1. Irreplaceable critical components: Approximately 22% of European businesses have no viable alternatives to critical components imported from China, meaning that if the supply chain from China is disrupted, European companies face an immediate risk of production halts.
2. Weaponization of trade policies: China’s export control on rare earths and critical minerals has led to production interruptions and losses of millions of euros for some European companies, signaling that China is using its dominance in the supply chain for geopolitical leverage.
3. Market perception shift: European companies’ perception of the Chinese market has shifted from being full of opportunities to a source of risks that need to be managed, with over 70% of surveyed enterprises reevaluating their supply chain strategies in the past two years.
To be continued…