European Tour 2023: Meeting with MERICS

2023-01-11 | All chapters

CH outlined the main themes from the Chamber’s Position Paper, and noted the importance of the EU re-engaging with China.

GS outlined the main issues that are roadblocks to EU-China relations, but played down the role that China is playing in Russia’s war in Ukraine. He also raised the point, to what extent does the EU need engagement for the sake of engagement? He noted that the postponement of EU-China dialogues has been an ongoing issue. He asked why companies not are investing more in China?

PB noted that in the aerospace industry there is a need to be close to clients, and  a need to invest more in maintenance. In terms of supply chains that it is not the right time to invest anymore due to the risks that have been raised over the last three years. He noted that 2022 was the year of trauma, with power shortages, and COVID infections leading to plants closing, as well as the dramatic SH lockdown and logistics issues that resulted. PB also noted that we do not know if there are new risks coming, while at the same time other markets are interesting too – for example, the growth of India is fast and people want to travel.

RdG said that China is second largest market for the pharmaceutical industry and that there are certain technical challenges that require re-engagement from the EU with China. He noted China’s 14FYP committed to synchronise registration of medical devices and drugs, but that there is still a big gap here. He said that while the regulatory framework and standards have been accelerating, this is because China needs to do this to access global markets. He concluded by noting how the exodus of foreign nationals is not helping to restore trust among foreign investors.

FB said that the real estate crisis and the clamp down on the private sector in China, and in particular the tech sector, has undermined the appetite for entrepreneurs to drive investment and innovate. He noted how suppliers along the chain struggled throughout 2022 to make ends meet. He also noted that a lot of bias against China in Europe due to information that is disseminated through the media has had an impact, with some European clients now asking about shifting supply chains to other areas outside China. FB acknowledged the trend of reshoring, nearshoring and friend shoring now taking place. He noted that the CAI is something that has potential, although we know the reason why it has been put on hold, but there are still areas for engagement such as decarbonisation.

GS asked if the overtures from China to re-engage can be trusted by the EU, as this is a pattern that China has gone through before when its economy seems to be in trouble.

FB expressed his view that there does seem to be a genuine appetite to re-engage.

PB noted China's push for self-reliance is becoming stronger, which is a barrier to deeper EU-China engagement. Companies that can bring what China needs have an advantage, he said, but the direction China is going in is clear, although this doesn’t mean European companies can’t do business.

There was a general discussion on self sufficiency and sectors that are encouraged and those that are not.

FS asked if there had been any improvement on IPR, administrative and regulatory issues.

CH noted that some progress made but not enough, with IPR an example – the written laws and regulations are sound, but the implementation is still lagging.

PB outlined issues in the aerospace industry – commercial aviation has become a major focus in China with COMAC as the newcomer and noted the large amount of government support they received through subsidies.

FB asked if through the implementation of zero COVID and China’s overall ideological drive, has it lost the trust of people – how deep is the scar? Is XJP on the wrong track?

PB responded that CEOs have seen what happened with the big tech companies in China, and that there is wariness that they could be nationalised.

RD noted that trust has been reduced for sure, although he said it isn’t the policy per se, it is the fallout in terms of debt, unemployment that are the main issues.

RdG reiterated that China’s reliability and predictability have been eroded.