Wednesday, March 22, 2023

“Storm rally”: EU companies say US-China decoupling hurts | Business and economic news

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The biggest concern is the tech rivalry between the United States and China, European business groups say in a new report.

The digital decoupling between China and the United States could severely affect European companies in China and they should “prepare for the worst,” European business groups said, adding that they could be forced into a costly separation of their international operations.

While the political, commercial and financial decoupling is worrying, the Sino-U.S. Tech rivalry is expected to cause the biggest upheaval, said the European Chamber of Commerce in China and the Mercator Institute for Chinese Studies, a think tank based. in Berlin. in a report released Thursday.

Just as the United States tries to purge its networks of software and components made in China, China, which relies heavily on semiconductor imports, is pushing for digital self-sufficiency, he said. European companies are caught in the middle.

House Speaker Joerg Wuttke, speaking at a briefing ahead of the report’s launch, warned of a “growing storm”.

Data flows, information, communication and technology (ICT) equipment and digital goods and services would be the areas where decoupling hurts businesses the most, he said.

Businesses are already grappling with some of these issues, with varying definitions of “data” already having a “significant negative impact” on nearly half of the companies surveyed, the groups said in the report.

They said 19% of companies had abandoned or postponed new projects, goods or services due to China’s personal information regulations.

‘Digital disintegration’

“As the world moves towards increasing techno-nationalism, the possibility of complete digital disintegration requires sober analysis,” they said in the report, which comes two weeks after the EU and China struck a deal. agreement to give European companies better access to Chinese markets.

US tries to build global ‘clean grid’ that excludes Chinese tech [File: Alessandro Bianchi/Reuters]

A US Clean Network proposal aims to build a global digital alliance excluding technology that Washington sees as being manipulated by the Chinese Communist government.

Protectionism in China is already preventing companies from using European digital solutions and networking equipment, said Jacob Gunter, also in the House.

Prioritizing national security concerns over business and trade increases uncertainty and hurts sentiment, as does China’s declining image in Europe, according to the report, which was based on surveys of around 120 chamber members and conducted at the end of last year.

European companies may be forced to choose between entirely separate operations in China and the rest of the world, or find ways to use a more “neutral” architecture, according to the report.

“The costs of either option are considerable. Every step taken on the road to decoupling inflicts further damage to innovation, efficiency, cost reduction and economies of scale, ”he said.

“We’re on a descent… it’s picking up speed,” said Wuttke. “I don’t see any exit ramp at this point.”


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