European Firms Seek Exit as China’s Export Curbs Bite

Key Points

• One in three European companies is looking to move its supply chain out of China.
• China’s export controls are causing major delays and uncertainty for businesses.
• Many firms are heavily dependent on Chinese components, raising the risk of production stoppages.
• The issue is a direct fallout from the ongoing U.S.-China trade war, with Europe caught in the middle.

China’s tightening grip on exports is pushing European companies to actively seek new suppliers abroad. A new survey from the European Union Chamber of Commerce in China reveals that one in three member companies is exploring ways to shift its sourcing, trying to escape the crossfire of the U.S.-China trade war.

The chamber’s president, Jens Eskelund, said the controls create huge uncertainty for businesses. Companies now face the risk of production slowdowns or even complete stoppages. The survey found that 40% of companies report that China’s commerce ministry is processing export licenses much more slowly than the 45 days it promised, adding more stress to an already fragile global trade system.

This isn’t a new fear. In April, similar curbs on rare-earth metals forced some European carmakers to shut down production lines. Beijing’s willingness to use its export power as a weapon in trade negotiations has businesses on edge. Despite a recent pause in new curbs negotiated between the U.S. and China, the on-the-ground reality for businesses hasn’t improved.

The survey highlights just how deeply entangled European businesses are with China. Nearly 70% of companies said their overseas factories depend on Chinese parts, now covered by the export controls. Besides the delays, businesses complained about the lack of transparency in the application process and even worried that their intellectual property would be stolen.

For some, the financial hit is massive, with one firm estimating the new measures will cost it 20% of its global revenue this year. However, the impact isn’t universal, as many firms reported that the controls would not affect their operations.