Roughly one-third of European companies in China affected by China’s expanding export control regime intend to diversify their supply chains, with firms concerned about supply chain disruptions, long delivery delays and rising costs. The European Union Chamber of Commerce in China (EUCCC) found in a flash survey of 131 member companies that more than half expected to be hit by Chinese export controls, with the group calling for policymakers to find a long-term solution to provide businesses with stability and predictability. Around 36% of the affected companies planned to work with suppliers to develop capacity outside China, while 43% had yet to decide how to adjust their supply strategies in response to the export control policies, according to the report.
“China’s export controls have increased the uncertainty felt by European businesses operating in the country, with companies facing risks of production slowdowns or even stoppages,” said Jens Eskelund, President of the EUCCC. Europe has felt a deep impact from China’s recent announcement of export control measures on a string of products, most notably rare earth elements that are vital to the production of hi-tech goods ranging from electric vehicles to fighter jets. Beijing announced in October that it would further expand its rare earth export controls, but suspended the introduction of the measures for one year after Chinese President Xi Jinping met U.S. President Donald Trump later that month. The report found 56 of the 131 companies that responded to the survey did not expect to feel an impact from China’s export control measures. If they were to be fully implemented, 62% of the affected companies said they would face “moderate” to “significant” supply chain disruptions, with 13% expecting to have to slow down or stop production.
Many of the affected European firms also complained that the export control measures would cause delivery delays or raise their costs. The application for an export license could take longer than promised – 40% said it took more than 45 days – and customs clearance procedures could cause further hold-ups, the report found. The Chamber’s Vice President, Stefan Bernhart, called for a “sustainable, long-term solution”. “Introducing a general licensing mechanism in the near future would provide much needed stability and predictability, and could put a floor under the deterioration of business confidence caused by these export controls,” he said. More than one-third of affected companies said the current export license approval process added one to two months to their delivery times, while 40% said it added more than two months, the South China Morning Post reports.
