There are concerns about protectionism in China: the political leadership wants to stop other countries from decoupling supply chains. Therefore, foreign investments should now be attracted.
China’s Prime Minister Li Qiang wants to stop other countries from decoupling supply chains. “We are willing to build closer manufacturing and industrial supply chain partnerships with all countries,” Li said at the first China International Supply Chain Expo (CISCE).
Li underscored that the international community “needs to be more cautious about the challenges and risks posed by protectionism and uncontrolled globalization.” China will continue to create an international business environment based on the rule of law.
China wants to attract foreign investment
The background is that foreign investment in China had recently fallen to a historic low. The fair is an attempt by Beijing to attract international investment. The European Union and USA had announced that they would redirect strategically important supply chains from China to other countries in order to minimize economic and political risks that could arise from the close ties.
Geopolitical crises such as Russia’s war in Ukraine, fears of a Chinese invasion of Taiwan, but also the economic experiences of the Corona crisis have led to connections with China being reconsidered. Many companies are therefore deciding against expanding supply chains in China and turning to others. This strategy is called China-plus-one.
“Systemic rival”
In Germany, Chancellor Olaf Scholz has repeatedly called on companies to diversify their supply chains and to cooperate more with other Asian countries on exports and imports.
The federal government is insisting on de-risking business with China, Germany’s most important trading partner. This is intended to avoid dependencies in key industries. The China strategy states that Germany is sticking to economic integration and close trade relations with China.
In the future, however, the aim will be to increase economic resilience and reduce risks. The federal government therefore wants to reduce dependencies in critical areas and diversify economic relationships overall. The aim is to establish and expand balanced partnerships in Asia without closing oneself to China.
ECB survey: Companies see risks
Many companies are also concerned about their dependence on China, as a recent ECB survey shows: Two thirds of the companies surveyed in the survey named China as a country that poses a risk to the supply chains in their industry. According to the survey, around 40 percent purchased essential intermediate goods from the Middle Kingdom and viewed this as an increased risk.
“However, most companies implemented strategies to reduce their exposure to the country or countries in question,” the ECB said. According to the survey, around 40 percent said they tried to obtain the same inputs from other countries outside the EU. 20 percent said they followed a strategy of sourcing such products primarily from EU countries.