EuroCham points to negative outcomes of China's supply chain dominance

China’s highly-efficient industrial clusters have seen the country turn the world’s only manufacturing superpower and a cornerstone of global supply chains. However, for many companies, while cost and efficiency are still important considerations, other factors, including the need to ensure resilience and flexibility, are increasingly driving supply chain decision making, noted the report, which illustrates the dilemma China’s global supply chain dominance has created.

Despite the benefits China offers as a manufacturing and sourcing destination, companies now need to take into consideration a growing list of drawbacks—ranging from exposure to trade wars, to long-standing concerns over discrimination in government and public procurement—as they look to balance their position in the China market against their need to continue serving other key markets around the world.

For some, this involves actively reducing reliance on China in their supply chains to the extent that this is possible, and creating multiple sources for the same input, said the report, titled ‘Dealing with Supply Chain Dependencies: Challenges and Choices’.

China’s substantial trade surplus—along with a now demonstrated ability to exert control over critical goods through export controls—has also caught the attention of global governments wary of further deepening dependencies on a single country, a press release from the chamber cited the report as saying.

This has led to an unprecedented number of trade investigations being lodged against Chinese products, and initiatives being developed to reduce dependencies on China at the country level.

Over time, China’s ability to leverage its dominant position through measures like export controls may well diminish as these initiatives mature, it remarked.

“The current EU-China trade relationship is like a fly waiting for a windscreen,” said Jens Eskelund, president of the European Chamber.

“The ballooning trade imbalance between the EU and China—underpinned by an undervalued renminbi—along with the numerous critical dependencies that the EU has on China, are pushing Brussels towards more decisive action. The sooner China recognises the EU’s growing economic security concerns, and the two sides are able to address such core issues to enable a more sustainable and mutually beneficial trade relationship, the better,” he added.

ALCHEMPro News Desk (DS)