European companies are preparing for deeper efforts to cut exposure to China-centric supply chains, as a leading business voice in Beijing signals a shift. The comments come amid trade tensions, export controls, and new rules that are reshaping how goods move between Europe and Asia. The change is gaining urgency as governments and boardrooms weigh cost, security, and political risk.
A Call for Reduced Reliance
Jens Eskelund, president of the European Union Chamber of Commerce in China, warned that European firms will likely seek more supply options outside China. His message echoes a steady move among policymakers in Brussels who promote “de-risking” rather than a full break.
“European Union Chamber of Commerce President Jens Eskelund expects more efforts to reduce reliance on China’s supply chain.”
The signal lands at a time when many companies are reassessing sourcing strategies that once prized speed and cost over resilience. The pandemic and the war in Ukraine exposed vulnerabilities, from factory shutdowns to shipping bottlenecks and energy shocks. Managers now weigh redundancy and geographic spread as core requirements.
De-Risking, Not Decoupling
European officials have framed their strategy as reducing strategic dependencies while keeping ties where trade is balanced and secure. China remains a major market for European goods and a key supplier of intermediate inputs. But policy debates now focus on how to handle sensitive sectors such as advanced tech, clean energy, and critical minerals.
Brussels has advanced screening tools for inbound investment and export controls in narrow areas tied to security. It also pursues trade enforcement, including probes into subsidies, to ensure fair competition. The aim is to limit choke points without cutting normal commerce.
Pressure Points: Raw Materials and EVs
Recent moves underscore the stakes. China placed controls on exports of gallium, germanium, and certain graphite products, materials essential for semiconductors and batteries. European buyers face longer lead times and higher compliance checks, complicating planning for automakers and electronics makers.
At the same time, Europe has launched a subsidy investigation into imported electric vehicles. Policymakers argue that underpriced imports could distort the market and undermine domestic producers. The clash tests Europe’s green transition plans, which depend on affordable batteries, while also seeking fair market conditions for its industry.
How Companies Are Responding
Corporate strategies are shifting from single-country sourcing to a mix of regional hubs. Firms seek alternative suppliers in Southeast Asia, India, and Eastern Europe, and increase inventory for critical parts. Some are building “China-plus-one” models to keep serving the Chinese market while adding backup capacity elsewhere.
- Diversifying suppliers for critical inputs
- Relocating final assembly nearer to end markets
- Holding more safety stock for key components
- Signing longer-term contracts to secure materials
- Investing in traceability and supplier audits
Small and mid-sized firms face higher costs to reconfigure operations and may need public support or shared services to reach new suppliers. Larger firms can absorb the expense but must manage quality, logistics training, and regulatory checks across more sites.
Data, Trends, and Outlook
Trade between the EU and China remains large by any measure, and many sectors depend on Chinese inputs. Europe relies heavily on China for rare earths, magnets, and battery materials, according to public EU assessments. While substitution is possible in some areas, it takes time to qualify new suppliers and retool factories.
Analysts expect a gradual shift rather than a sharp break. Near-term changes may center on parts with clear security or supply risks. Over the medium term, investment may tilt to resilient networks that can route production across multiple countries. Logistics providers report rising interest in routes that reduce single-point failures.
What to Watch
Key milestones will include outcomes of trade investigations, any new export restrictions, and the rollout of European programs to support critical materials and clean-tech manufacturing. Corporate earnings calls will offer clues about re-shoring costs and timelines. Investors will monitor whether diversification improves delivery reliability without eroding margins.
For now, European business leaders are setting expectations. As Eskelund signals, the next phase is less about sudden exits and more about disciplined risk management. Companies will keep buying and selling with China, but with more backup plans. The balance they strike—cost versus resilience—will shape how Europe trades and builds in the years ahead.
