European firms in China are overly focused on managing risks instead of increasing market share, which is hurting efficiency and innovation and increasing costs for consumers, a European business lobby group warned on Wednesday.
The European Chamber of Commerce said in its de-risking report that companies were "skewed disproportionately towards risk management and building resilience" because of the COVID pandemic, global economic slowdown, Ukraine war and U.S.-China geopolitical competition.
The EU has found itself dependent on China for certain products including critical minerals, and has begun closer scrutiny of foreign investments and strategic tech exports to rivals such as China. Brussels maintains that de-risking is different from decoupling from China.
About three-quarters of the chamber's members have reviewed their supply chains in the past year, with 21% moving more production into China and 12% moving more out, Jens Eskelund, president of the European Chamber of Commerce in China, briefed reporters ahead of the report's launch.
"China has a rational self-interest in ensuring that there is a workable commercial relationship with Europe going forward. And that, frankly, is put at risk right now," Eskelund said.
"I think there is a risk that Europe feels compelled to react in more protective ways."
In September, the EU Commission launched an anti-subsidy investigation into Chinese electric vehicles (EVs) to determine whether to impose tariffs to protect EU producers, which China has labelled "protectionist". The probe is set to conclude by November, although the EU could impose provisional duties earlier.
The EV probe, along with other risk management measures, has driven record-high concern about the politicisation of China's business environment among the chamber's some 1,700 members, Eskelund said.
Eskelund argued for more dialogue with Chinese authorities to address EU firms' concerns, otherwise there could be more "tit-for-tat" trade measures going forward.
"China is applying exactly the same logic across vast sectors of the economy that Europe is now just beginning to do on a rather limited scale," he said.
