European businesses are dealing with mounting expenses and uncertainty due to China’s export restrictions, with some companies facing costs that could top hundreds of millions of dollars, a new survey shows.
The European Union Chamber of Commerce in China released findings Monday showing one company estimates it will face more than €250 million ($290 million) in extra costs. Another business said the restrictions will add costs equal to about 20% of what it makes worldwide in 2025. The survey was done between Nov. 6 and Nov. 24.
Around one-third of European businesses operating in China said they now plan to find suppliers in other countries because of these policies. The results show how much European companies depend on China for essential materials and technology, and what happens when that flow gets interrupted.
Retaliation over trade war restrictions
China put these controls in place to hit back at tariffs and other limits the US placed on Chinese goods during their trade fight. The restrictions cover resources like rare earths, which are hard to find elsewhere.
China recently put a pause on some wider rules that would have blocked exports containing even small amounts of certain rare earths. This happened as part of a deal to ease tensions with the US. But both countries are still working out the details for general licenses that would make trade easier. They already missed their target to finish these talks before Thanksgiving.
Stefan Bernhart, who serves as vice president of the European Chamber, said getting a general licensing system in place soon would help a lot. “Introducing a general licensing mechanism in the near future would provide much needed stability and predictability, and could put a floor under the deterioration of business confidence caused by these export controls,” he said.
China’s export controls go beyond just rare earths and important minerals. The country also limits moving sensitive information across its borders and blocks some types of computer chips from being sold abroad.
Germany buys more rare-earth magnets from China than any other single country. US shipments bounced back in October, hitting their highest point since January. But Germany received less for the second month straight after reaching a peak in August, based on the newest Chinese customs records.
The survey findings about companies wanting to move their sourcing away from China didn’t explain where they would go or how they would do it, given that China controls so much of the mining and processing of rare earths.
About 11% of companies that answered the survey said they worry about having to share information that includes their private business secrets when they apply for licenses.
The report mentioned that the European Commission has a website where companies can request export licenses, check on customs clearance, and flag problems they run into. However, only 18 companies said they used this tool.
A total of 131 chamber members answered the survey. Of those, 75 said Chinese export controls affected their business.
Automakers scramble to replace Chinese parts
European car companies are also looking for ways to remove parts that use Chinese components. They’re worried about growing political conflicts, including problems with chipmaker Nexperia and China’s rare earth restrictions.
Several car manufacturers are pushing their main suppliers to find lasting replacements for Chinese semiconductors, people who know about the situation told Bloomberg. The car industry is thinking about bigger changes to how it gets parts to deal with changing political situations, said Matthias Zink, who leads CLEPA, Europe’s main suppliers group.
“We had some indications already, questions like, ‘how can you supply me without this dependency on China?’” said Zink, who also runs the powertrain and chassis division at Schaeffler AG.
These moves follow a sudden supply problem at Chinese-owned Nexperia in October. The situation got worse when China stopped exports of key parts from Nexperia’s Chinese factories after the Netherlands took control of the company’s Dutch locations.
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Source: https://www.cryptopolitan.com/european-businesses-steep-costs-china-export/
