Companies Rethinking Engagement with Chinese Market Due to Politics – EUCHAM

By: Jessica Ferreira

The global business environment has become increasingly politicized, leading companies to rethink their engagement with the Chinese market, according to a new report by the European Chamber of Commerce in China (EUCHAM).

In the past several years, the European Union (EU), China and the United States (US) have engaged in risk management and efforts to strengthen their economies. The three respective strategies currently being pursued by each bloc all represent a retreat from globalization as we know it to varying degrees, according to the EUCHAM report.

From a business point of view, it adds, an environment of increased risk is by no means good for companies, as their resources should be devoted to developing better products and services, not increasing their budgets for risk assessments and compliance efforts.

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Some of the approaches that companies are now forced to adopt imply a significant loss of efficiency, further increasing operating costs, affecting innovation and ultimately resulting in an increase in costs that will be passed on to consumers, benefiting no one.

 According to the report, some of the main risks currently faced by European companies in China include: overexposure to the Chinese market, geopolitics, supply chain disruptions,conflicts between the EU’s and China’s respective legal regimes, and non-compliance with China’s cybersecurity legislation.

Recently, the President of the European Commission (EC), Ursula von Der Leyen, highlighted the EU’s new approach to mitigating multiple vulnerabilities in its economy, grounded on a “de-risking” strategy, based not on a separation from China, but on rebalancing relations.

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Von der Leyen also stressed that the bloc would not pursue policies aimed at self-sufficiency, but rather diversification, allowing its supply chains to continue with minimal disruption, which should result in new trade opportunities and a continued emphasis on remaining highly integrated with the global economy.

The EC chief´s speech, which included more assertive comments on EU policy towards China than previously articulated, was not well received by China, with some critics claiming that it misrepresented and misinterpreted Chinese policies and positions, while others highlighted the risk of associating trade with ideology.

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