Report by EU Chamber + CMG: Mitigating a growing number of risks

                                                               
Report Download: here


Beijing, 20 March 2024
The European Union Chamber of Commerce in China (European Chamber), in partnership with China Macro Group (CMG; CNBW member), published the paper "Riskful Thinking: Navigating the Politics of Economic Security". Based on in-depth Chamber member interviews and extensive research, the report details the different approaches adopted by the European Union, China and the United States for managing perceived threats to their respective economies, as well as the actions that European businesses are taking to build resilience into their China operations and mitigate a growing number of risks. 

The EU has so far been careful to build its de-risking toolkit in a way that minimises the impact that it could have on its engagement with its trade and investment partners. It focuses on building resilience through diversification - an approach that was catalysed by both the recognition of the need to eliminate overdependence on single sources of critical goods, and the supply chain disruptions caused by the COVID pandemic and Russia’s invasion of Ukraine - and removing potential market distortions, while remaining as open a market as possible. 

By contrast, China’s approach is far more comprehensive, in terms of the number of policies that now have a security rationale, the potential scope of their implementation and the impact they would have on business. Since the mid-2000s there has been a steady convergence of development and security concerns in China, with the goals of achieving a high degree of ‘controllability’ of its industrial system, technological self-reliance and supply chain security now of paramount importance. 

For its part, the US has moved away from its rhetoric of 'decoupling" in favour of 'de-risking', creating the perception that its approach is closely aligned with the EU’s. However, while both economies aim to build their domestic industrial capabilities and bolster their competitiveness in key industries, the US differs in that it has also been taking a more pre-emptive approach, with the goal of impeding China’s development in key technological fields.

At the corporate level, the volume, complexity and severity of the risks companies face have grown exponentially in recent years, as politics has seeped into the business environment. While Chamber members differ in how they are responding, clear sets of strategies are emerging with some pulled into the China market to increase localisation and/or investment, and others pushed to shift investments and/or parts of their operations away from the country.

"While it is natural that all global actors will seek to ensure the security of their respective economies, it should be done in a way that is minimally disruptive to business,” said EU Chamber's president Jens Eskelund. "Actions taken in the name of risk management and strengthening economic security should be proportionate, targeted and precise and should never become a cover for protectionism." 

"China’s 14th Five-Year Plan marks a strategic shift in Chinese policymaking and includes risk management as a key pillar", said Markus Herrmann Chen, co-founder and managing director of China Macro Group. "Today, policymakers have a comprehensive toolkit at their disposal geared towards mitigating risks and promoting security in China’s economy, which goes beyond merely advancing self-reliance."


China Macro Group
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