European businesses in China are already feeling the pain from rising US-China trade tensions, even though the first shot of an all-out trade war may not be fired until next week, according to an official with the European Union Chamber of Commerce in China.
George Lau, a vice-president of the chamber, which represents the interests of EU companies operating in China, said a big European logistics company had decided to shut down a China-US shipping route owing to the expected drop in trade flows triggered by the expanding confrontation between the world’s two largest economies.
“They don’t know what to do,” Lau, board chairman of the South China chapter, said of the European company.
The company, which Lau declined to identify, was waiting to see how the developing trade dispute disrupted shipments, he said.
The United States has said it will impose a 25 per cent tariff on US$34 billion worth of Chinese imports from July 6.
China has responded with a threat to immediately slap equivalent duties on the same amount of American products – sparking a promise from US President Donald Trump to impose a 10 per cent tariff on another US$200 billion of Chinese goods if Beijing retaliates.
Speaking on the sidelines of an event in the southern city of Shenzhen on Friday, Lau said his own company TÜV Rheinland, a technology service provider, also had been hurt as the looming trade war dampened business sentiment.
“When you are a part of the Chinese market, you can’t avoid that,” he said. “The larger a company is, the deeper it may get hurt.”
Chamber president Mats Harborn said the uncertainty created by the trade battle was causing European companies to postpone investment decisions – a delay that “might trigger the ending of the boom period of the present business cycle”.
Meanwhile, the Chinese government has been reaching out to multinational companies for support in tackling what it calls the “protectionism and isolationism” of Trump’s America.
In a meeting with executives from American and European multinational companies in Beijing last week, Chinese President Xi Jinping promised that China would remain open for business during the trade battle and said it would to move to open up its markets to foreign investors.
On Thursday, the Ministry of Commerce and the National Development and Reform Commission said they had further reduced restrictions on Western enterprises by shortening the list of areas in which foreign companies were blocked from investing.
Beijing also issued a white paper saying it had “faithfully” honoured the promises it made when it joined the World Trade Organisation (WTO) and wanted the free trade system to continue.
But Harborn said China had essentially caused the current trade tensions by failing to make good on its WTO promises on time.
More than half of the respondents to a chamber survey of various European companies operating in China said no new markets had opened up to them so far this year, he said.
Yet most of the European businesses chose to stay in China, despite the deteriorating trade environment and rising operating costs, according to the survey.
Harborn said EU companies would be interested in taking part in Made in China 2025, but the barriers for foreign parties were prohibitively high.
Just 65 per cent of European companies had access to the industries covered by the programme, Harborn said, adding: “It should be 100 per cent.”
He said the success of Made in China 2025 depended on China allowing its companies to freely integrate technologies. “The access to global supply chains should be totally free and open,” Harborn said.
Beijing has been trying to play down Made in China 2025 by ordering state media to minimise their coverage of the programme, as Trump makes it a focus of his trade battle, the Post reported this week.