Washington and China have been engaged in a trade and technology war since 2018, with both sides looking to reduce their interdependence. The decoupling or disentangling of the world's two biggest economies, tremors of which are being felt across the global economy, however, is not the biggest challenge facing European firms doing business in China, a survey showed.To get more International finance news china, you can visit shine news official website.
The firms rated the US-China economic split below challenges posed by a global economic slowdown, the COVID-19 pandemic, competition with Chinese firms, market access issues, and rising labor costs.
Despite a high level of exposure to US-China tensions, European firms remain primarily unprepared for a potential deepening of the rift between the two economic superpowers, the survey published as part of a study by the European Union Chamber of Commerce in China and European think tank Merics found.
"Companies would do well to remedy that imbalance while decoupling remains low on the list of priority challenges, rather than after it has risen in significance," the authors of the report said.
Decoupling trends to worsen
The authors expect the US and China to continue to reduce their reliance on each other, despite a potential improvement in relations under incoming US President Joe Biden, who has been critical of Beijing's trade abuses that he says are hurting US workers. Biden has also supported the ban on Huawei on security grounds and has expressed concern over TikTok's handling of data.
"The massive shift in public opinion towards China, as well as a growing bipartisan consensus in Washington to consider China a strategic competitor on a divergent trajectory, means things are unlikely to result in 'globalization renewed'," they said.
China is also doubling down on its efforts to build self-reliance as part of its "dual circulation" strategy. Beijing is looking to spur domestic innovation to cut its dependence on US high-tech products, such as semiconductors — a vulnerability laid bare by the ongoing tensions.
"The technologies that are defining the future, and which are increasingly integrated into every sector of the economy, are being divided between two of the world's three largest economies, each of which has a growing firewall separating itself from the other," the report said.
The firewall would disrupt global supply chains, which are reliant on both US and Chinese technologies, causing headaches for European firms.
"Software is possibly going to be a real challenge if the US insists on the US software and China insists on their software, and then all of a sudden, you are sitting between unable to produce," Jörg Wuttke, president of the EU Chamber of Commerce in China, told DW, adding that European firms can't afford to be complacent.