EU companies rethinking China operations over uncommon earths curbs: Lobby | UNW

BEIJING: Beijing’s stringent export controls on rare earths are driving a fundamental shift in how European firms think about their operations in China, a business lobby warned on Tuesday (Apr 14).

China dominates the global industry for rare earths, which are critical for making a wide range of products, from everyday consumer electronics to equipment used in the defence sector.

The country’s leaders leveraged that strength in spectacular fashion last year, reaching a deal with Washington in October to pause a blistering trade war after Beijing’s curbs on their exports sent shockwaves across supply chains.

But the approval procedures now in place are still causing headaches for many foreign firms seeking to move supplies and products abroad, a report published on Tuesday said.

“In many cases the licensing process remains slow, unpredictable, uncoordinated and lacks transparency,” the European Union Chamber of Commerce in China said.

The new restrictions amount to a “major expansion of the country’s export control toolbox”, the report added.

“There is now a recognition that China’s emerging export control regime poses a long-term business risk, given that the ability to export a particular item could be taken away at any point based on political rather than security factors.”

Beyond simply adding to administrative burdens, the curbs have been forcing a deeper rethink for many European firms, Chamber president Jens Eskelund said at a media event ahead of the report’s publication.

Many companies from the continent were “caught flat-footed” last year when their operations encountered snags as a result of the China-US trade war, added Eskelund.

There has now been a “profound mindset change” in which firms “can’t just rely and say ‘my supplier’s got my back’, I don’t need to worry”, he said.

Companies and countries are now looking for ways to ensure “that they have a plan B if something should happen”, he added.

“I think it’s something that will, at a certain point in time, translate into a real measurable economic impact.”