On 14th January 2021, the European Chamber, in partnership with MERICS, released a major report, Decoupling: Severed Ties and Patchwork Globalisation, which measures the costs of decoupling for businesses operating in China. In this episode, Senior Policy and Communications Manager at the European Chamber, Jacob Gunter, MERICS Senior Analyst, John Lee, and MERICS analyst, Rebecca Arcesati, discuss the state and implications of digital decoupling.
The main findings of digital decoupling are below:
- Data governance regimes in China and the EU already significantly restrict the transfer of data across the borders of these jurisdictions, creating significant compliance risks for companies.
- European companies anticipate that further restrictions on privacy and national security grounds will come into force soon, due in part to new legislation and judicial decisions in the EU, and further measures in China.
- As a result, it will be difficult and risky to exploit the potential of data pools across the EU’s and China’s jurisdictional boundaries, even as the importance of data as a tool for innovation and efficiency-building grows.
- US efforts to decouple from Chinese telecommunications and network equipment, and the scrutinisation of any China-originated links found in network value chains under its Clean Network programme are impacting European companies and their offerings in the US market.
- China’s rapidly expanding barriers to foreign telecommunications and network equipment value chains via requirements for “autonomous and controllable” technology is pushing European players out of the market or into niche roles.
- In combination, these dynamics are inadvertently forcing companies to consider firewalling their China and US network operations from one another, with their China operations relying more and more on local solutions and US ones being stripped of China-sourced inputs.
- China’s long-standing barriers to foreign telecommunications services and digital solutions now affect a larger number of industries than previously surged, especially with regard to the digital technology at the centre of the fourth industrial revolution, which includes value-added telecommunications services (VATS) like cloud and data centres.
- To offer their digital solutions, which increasingly come from traditional industries outside of ICT/ telecommunications, European companies are forced into joint ventures (JVs) with Chinese counterparts.
- As a result, European companies often have to integrate their products with locally-sourced digital solutions to serve local customers, which can result in the provision of suboptimal offerings that are not globally interoperable.
Please click here to download the report.