China hits back at West's de-risking strategy at supply chain expo

China opposes protectionism and wants to strengthen supply chains with all countries, Premier Li Qiang said on Tuesday, as a growing number of nations voice concern at how much their supply chains depend on the world's second largest economy.

Li's comments comes amid calls over the past year from the US and the European Union to reduce their dependence on China in certain sectors and “de-risk” their supply chains, as well as efforts to cut off Chinese enterprises from some advanced semiconductors.

“We are willing to build closer production and industrial supply chain partnerships with all countries,” Li told the first China International Supply Chain Expo (CISCE), adding that the international community needs to be “more wary of the challenges and risks brought about by protectionism and uncontrolled globalisation.”

Recent geopolitical tensions, from Russia's war in Ukraine to concerns over a future Chinese invasion of Taiwan, have led a growing number of foreign businesses to opt against expanding their supply chains in China, instead directing investment to countries including India, Mexico and Vietnam that enjoy better ties with the US, a strategy known as China-plus-one.

The expo, organised by the state-run China Council for the Promotion of International Trade (CCPIT), is Beijing's latest bid to increase foreign investment in China, which has dropped to historic lows.

The value of announced US and European greenfield investment into China dropped to less than $20bn (R373.96) last year, from a peak of $120bn (R2.24-trillion) in 2018, according to Rhodium Group, while investment into India shot up by some $65bn (R1.22-trillion) or 400% between 2021 and 2022.

Despite this decrease, China remains an attractive option: a survey conducted by HSBC bank at the China International Import Expo (CIIE) earlier this month showed 45% of firms expect to expand their supply chain in China over the next year.

“I think there is a lot of hyperbole around this. And I'm not sure whether the [de-risking] measures the EU or US are considering match the scale of the risk,” said Dan Marks, research fellow for energy security at the Royal United Services think-tank.

An apparent improvement in US-Sino ties, after Chinese President Xi Jinping recently met US President Joe Biden and participated in the Asia-Pacific Economic Cooperation (APEC) Summit, should also help reinforce China's position as a key manufacturing hub.

Zhang Shaogang, a CCPIT official who was part of the Chinese delegation at the APEC summit, said last week that 20% of the foreign firms exhibiting at the supply chain expo were US-based, and included Amazon, Apple, Tesla and Intel.

“We wholeheartedly hope US businesses can ... while actively realising their own development, also positively promote the healthy, stable and long-term development of US-China relations,” Zhang said.

Reuters