European companies double down on China amid tensions and Covid

June 11, 2021: Covid-19 forced much of the West to consider the risks of over-reliance on Chinese investment and supply chains.

In the early days of the pandemic, the European Union (and the UK independent of the new EU) struggled to gain access to medical supplies and personal protective equipment after national production and exports to China. It clarified the dangers of relying on one country for important goods. Covid 19 also highlighted China’s growing willingness to use economic coercion as a tool of foreign policy: No European country wanted to be the next Australia, whose coal ships sailed into Chinese waters. Stuck for months as Beijing and Canberra faced calls for calls.

Meanwhile, European companies in China felt trapped between a rock and a hard place. They faced real obstacles in China, including intellectual property theft and “negative lists” in which they were barred from certain industries. But for them, the climate improved as the Chinese government liberated the economy, and China was the only major economy to grow in 2020. On his return, politicians were urging him to double down on China and divert supplies.

The bottom line is that most people have no plans to do so.

The European Chamber of Commerce in China represents more than 1,700 EU companies doing business in China in various industries. Each year, it conducts a survey of 500 to 600 of its members to present a survey of business confidence, reflecting the self-reported challenges and ambitions of these companies. This year’s survey shows that EU companies are more committed to the Chinese market than ever since the chamber began asking its members this question.

These companies have persevered on the part of China, despite the harsh geopolitical environment and the challenges identified in the survey. This includes forced technology transfers and unfair competition from state-owned enterprises. In fact, two-thirds of respondents to the survey said they were optimistic about the future. Despite geopolitical tensions, the companies appear to be “taking action to secure their operations in China and reduce exposure,” the report said, attacking the supply chain. At stake, obviously, is our commitment on joint ventures with local partners.

A recent survey of sentiment among its members by the British Chamber of Commerce in China also identified similar trends. The survey said UK businesses are “market-oriented, and have high expectations for China’s economic prospects next year.”

“The fact that 82% of companies offer a reason to increase market investment in 2021 and companies expect to expand their offices in China by an average of 13 people next year has been pointed out,” according to the report. Meanwhile, only 3% of companies are actively moving out of the Chinese market.”

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