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 podcast, Senior Policy and Communications Manager at the European Chamber, Jacob Gunter, and MERICS analyst, Caroline Meinhardt, introduce into the chapter on trade decoupling.
The main findings of trade decoupling are below:
- Supply chains were already changing considerably in China before either the COVID-19 pandemic or the trade war, with low-cost production moving elsewhere and most European companies expanding locally and further onshoring their supply chains.
- The trade war and pandemic were disruptive and expensive, but European MNCs proved resilient and made shifts in supply chains to outright avoid many tariffs and maintain operations in China during its COVID-19 recovery.
- Many European companies report a desire to further invest in China and onshore supply chains for the local market to avoid potential future disruptions, though enthusiasm varies by sector based on how welcome they feel in the market.
- Targeted restrictions on the sale and export of critical goods—such as semiconductors, related manufacturing equipment, software or even rare earths—have become a more pressing concern for companies operating in China and globally.
- European companies have so far felt a limited direct impact due to export controls, but exposure is considerable for most. Pandemic-related shortages have shown how damaging lost or limited access can be, giving companies a taste of what the future may hold.
- Even companies with little to no risk may still be hit if their suppliers/customers can no longer source components or equipment from abroad. China’s new export controls increase risks as well, as locally-developed goods and solutions could be blocked from export.
Please click here to download the report.