On Wednesday, December 10th, the European Union Chamber of Commerce in China released a report regarding supply chain risks, emphasizing the urgent need for European businesses to diversify their supply chains and reduce their dependence on China.
The report highlighted a decrease in overall confidence of European businesses in the Chinese market. Compared to local competitors, the biggest concern for enterprises in China is the perceived unequal treatment.
Jens Eskelund, the Chairman of the European Union Chamber of Commerce, stated during a media briefing, “What we are seeing in terms of understanding the degree of supply chain dependence may just be the tip of the iceberg.”
He stressed that the level of dependence of European industries on China is high, asking, “Can we be certain that Europe could produce toothpaste without sourcing materials from China?”
After a tumultuous 2025, European businesses are now looking ahead to the new year. “Discussions on dependence (on supply chains) are now more profound than ever before,” he said.
The report by the European Union Chamber of Commerce pointed out that while China’s industrial clusters mean many global companies still rely on its supply chains to remain competitive, recent geopolitical impacts have highlighted the urgent need to move away from reliance on a single country and achieve diversification.
Due to the impact of increased US tariffs, China’s exports to Europe, Australia, and Southeast Asia surged, leading to a trade surplus exceeding $1 trillion in November for the first time, exacerbating diplomatic tensions due to unsustainable trade imbalances.
In November, China’s exports to the US dropped by 29% compared to the same period last year, while exports to the European Union grew by 14.8% year-on-year.
Eskelund stated that the more China exports, the greater the risks of countries taking countermeasures. Last year, China faced 198 trade investigations from the World Trade Organization, a record high, with over half coming from developing countries.
The report from the European Union Chamber of Commerce indicated that the trade deficit with China (in container terms) has widened from 1:2.7 in 2019 to the current 1:4 ratio. China’s ongoing deflation and continued depreciation of the Renminbi against the Euro have exacerbated the trading difficulties for European businesses.
The Chamber urged Beijing to address the macroeconomic conditions leading to trade imbalances, especially regarding exchange rates. “Perhaps the biggest issue we see in the Chinese economy is the factory price having continuous deflation for 37 months,” Eskelund stated. “When there is such a large disparity between Chinese deflation and European inflation, it worsens currency imbalances.”
The report noted that the extensive export controls imposed by the Chinese Communist Party on rare earths and key materials have “put European businesses in crisis”. Some companies reported production halts, resulting in losses of up to millions of euros. Consequently, over the past two years, over 70% of European companies in China have reconsidered their supply chain strategies.
Last week, the European Union Chamber of Commerce stated that one-third of its member companies are considering moving sourcing away from China due to Beijing’s export control policies. French President Macron, in an interview with French media last week, referred to China’s expanding trade surplus with Europe as a “life-or-death issue for European industry”, warning that if action is not taken to reduce the trade surplus with the European Union, Europe will be forced to take tough measures in the coming months, such as imposing tariffs on Chinese products.
The report from the Chamber highlighted that China’s practice of using its dominant position in the supply chain to pressure trade partners is facing increasing resistance from affected countries, leading to a tougher stance on China policy from the EU.