BEIJING, Dec 1 — China's tightening export controls are pushing European firms to explore new supply chain capacity outside of the world's second-largest economy, a European lobbying group said on Monday, seeking cover from the United States (US)-China trade war.
The European Union Chamber of Commerce in China said one in three member companies was looking to shift sourcing away from China due to Beijing's export control regime, with 40 per cent of respondents to its flash survey reporting that the Commerce Ministry is processing export licences more slowly than 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 the chamber's president Jens Eskelund.
He added that the curbs have "added more pressure to a global trade system that was already under a great deal of stress".
Some 130 companies participated in the survey, including the chamber's members like German automakers BMW and Volkswagen, Finnish telecommunications maker Nokia, and French oil major TotalEnergies.
Beijing shocked the US in October when it threatened even tighter controls on rare-earth exports, underscoring China's willingness to flex its muscles to keep Washington under pressure in trade talks.
The move raised fresh concerns among European companies that their supply chains could again be upended as they had been by similar curbs in April.
April's curbs forced some European Union (EU) automakers to shut down production lines, as Beijing's move to suspend exports of a wide range of rare earths and related magnets — seemingly aimed at squeezing US military contractors and automakers — caused global supplies to dry up.
"These survey results are significant because they paint a picture that runs counter to the post-Busan summit optimism," said Ankura Consulting managing director Alfredo Montufar-Helu.
He was referring to a pause in Beijing's new export curbs negotiated at a US-China summit in the South Korean city of Busan.
"The reality is that the deal was not signed in ink: Washington and Beijing are still debating the scope of concessions, while the EU is pushing for inclusion. Implementation is taking time, and in that gap, global supply chains are paying the price," he added.
Nearly 70 per cent of respondents to the chamber's flash survey said their overseas production facilities depended on Chinese components covered by the export control regime, while 50 per cent of exporting firms reported that their suppliers or customers made goods subject to the controls or would soon be.
EU firms said the Commerce Ministry's licence application process was taking longer than the promised 45 days, and respondents also took issue with its lack of transparency and disclosure requirements. They also raised concerns about potential intellectual property theft.
The survey also provided redacted examples of firms that were impacted by Beijing's export controls, including one that estimated the measures would lead to costs totalling 20 per cent of its global revenue this year, while another said it expected to incur expenses exceeding €250 million (RM1.19 billion).
But 56 of the 131 European firms that responded to the survey said the export controls would have no impact, suggesting that some sectors remain insulated.
