China’s export controls encourage European companies to move supply chains
China’s increasingly stringent export controls are pushing European companies to explore new supply chain capacity outside the world’s second-largest economy, a European lobby group said on Monday, seeking protection from the US-China trade war.
The European Union Chamber of Commerce in China said one in three member companies wanted to divert supplies from China because of Beijing’s export control regime, and 40% of respondents to a flash survey reported that the Ministry of Commerce was processing export permits more slowly than promised.
“China’s export controls have increased the uncertainty felt by European businesses operating in the country, with companies facing the risk of slowing or even stopping production,” said Jens Eskelund, president of the chamber.
These restrictions “add pressure to a global trading system that is already under enormous strain,” he added.
About 130 companies participated in the survey, the council said, which includes German automakers BMW BMW and Volkswagen VOW, Finnish telecoms maker Nokia and French oil company TotalEnergies TTE as members.
Beijing shocked the US in October when it threatened tighter controls on rare earths exports, underscoring China’s willingness to deploy its power to keep up pressure on Washington in trade talks. The move raised fresh concerns among European companies that their supply chains could again experience changes like those seen in April with similar restrictions.
Restrictions implemented in April forced several European Union automakers to shut production lines, as Beijing’s move to suspend exports of various types of rare earth metals and related magnets – which appeared to put pressure on US military contractors and automakers – caused supplies to dry up globally.
“The survey results are important because they paint a picture that contradicts the post-Busan summit optimism,” said Alfredo Montufar-Helu, managing director at Ankura Consulting. He was referring to a pause in new export restrictions negotiated by Beijing at a US-China summit in the South Korean city of Busan.
“The reality is that the agreement is not signed in writing: Washington and Beijing are still debating the scope of concessions, while the EU is pushing for inclusion. Implementation takes time, and in the gap, global supply chains will have to bear the brunt.”
Nearly 70% of respondents to the chamber’s flash survey said that their overseas production facilities depend on Chinese components covered by the export control regime, while 50% of exporting companies reported that their suppliers or customers make goods that are or will soon be subject to such controls.
EU companies said the Trade Ministry’s permit application process was taking longer than promised, namely 45 days, and respondents also took issue with a lack of transparency and disclosure requirements. They also raised concerns about potential intellectual property theft.
The survey also provided redacted examples of companies affected by Beijing’s export controls, including one that estimated the measures would cause a loss of 20% of its global revenue this year, while another survey said it expected costs of more than 250 million euros ($289.8 million).
But 56 of the 131 European companies that responded to the survey said export controls would have no impact, suggesting some sectors remain isolated.
Source: Reuters
