EU plans rules to curb economic dependence on China

The European Union is preparing to legislate against its growing economic reliance on China. European companies will soon be legally required to broaden their supplier networks, a move aimed at mitigating risks associated with dependence on single countries, particularly China. Commission President Ursula von der Leyen announced the plan following an EU summit in Brussels, stating that companies are too slow to reduce their risks independently.

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Companies are reducing their risks too slowly, which is why a corresponding legislative proposal is necessary.

The EU's trade deficit with China reached a record high last year, prompting leaders to label the situation "simply not sustainable." European Council President António Costa emphasized the need for concrete results in addressing this imbalance, noting China's failure to deliver on previous discussions. The urgency was highlighted by China's past exploitation of its dominance in critical raw materials, such as imposing export restrictions on rare earths, which are vital for modern technologies like smartphones and electric vehicle motors.

While the proposed law aims to ensure companies diversify, leaders hope that businesses will voluntarily increase their risk mitigation efforts, potentially rendering the legislation unnecessary. The EU also agreed to present a united front against any retaliatory measures from third countries. Belgian Prime Minister Bart De Wever stressed the importance of EU unity, acknowledging that retaliatory actions would not affect all member states equally due to varying vulnerabilities.

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We cannot continue to address this issue without achieving concrete results. And unfortunately, China has not delivered so far.

The EU's dependence extends to other crucial materials like magnesium, alongside rare earths. The competitive pressure from Chinese industries, often bolstered by substantial state subsidies, poses a significant challenge to European manufacturers. China's export-heavy strategy, coupled with minimal imports, has led to substantial trade surpluses.

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Retaliatory measures will not affect everyone equally. Not everyone is equally vulnerable.