Beijing (Brussels Morning Newspaper) – A European lobbying group stated on Monday that China’s increasing export restrictions are prompting European companies to seek new supply chain opportunities outside the world’s second-largest economy, as they try to mitigate the impact of the U.S.-China trade war.
In October, China expanded its rare earths export controls, adding five new elements and extra scrutiny for semiconductor users. The move extended fresh concerns among European firms that their supply chains could again be upended as they had been by identical restrictions in April.
Why are European firms seeking alternatives to China sourcing?
As reported by Reuters, the European Union Chamber of Commerce in China noted that one in three member companies is considering shifting their sourcing away from China because of Beijing’s export control regime. Additionally, 40% of respondents in their flash survey noted that the commerce ministry is processing export licences more slowly than initially promised.
“China’s export controls have increased the uncertainty felt by European businesses operating in the country, with companies facing the risks of production slowdowns or even stoppages,”
said Jens Eskelund, the chamber’s president.
The restrictions have
“added more pressure to a global trade system that was already under a great deal of stress,”
he also said.
The chamber reported that around 130 companies took part in the survey. These include well-known members such as German automakers BMW and Volkswagen, Finnish telecommunications company Nokia, and the French oil giant TotalEnergies.
When did China impose export restrictions?
In October, the world’s leading rare earths producer expanded its control list to include dozens of refining technologies and introduced regulations that will mandate compliance for foreign rare earth producers utilising Chinese materials.
China accounts for more than 90% of the world’s processed rare earths and rare earth magnets. The 17 rare earth elements are essential materials used in a variety of products, including electric vehicles, aircraft engines, and military radars.
Exports of 12 of these items are now limited after the ministry included five elements—holmium, erbium, thulium, europium, and ytterbium—plus related materials. Additionally, April’s restrictions led some EU automakers to halt production lines, due to Beijing’s decision to suspend exports of various rare earths and related magnets.
What risks do EU companies face under China’s controls?
Almost 70% of respondents in the chamber’s quick survey said their overseas production facilities rely on Chinese components regulated under export controls. Meanwhile, 50% of exporting companies reported that their suppliers or customers produce goods that are either subject to these controls or will be soon.
Europe firms said that the commerce ministry’s licence-application process was taking longer than the promised 45 days, with respondents also taking issue with its lack of transparency and disclosure requirements. They also raised concerns about potential intellectual property theft.
The survey included anonymised examples of companies affected by Beijing’s export controls. One estimated these measures would cost 20% of its global revenue this year, while another anticipated expenses exceeding 250 million euros.
