European Chamber Warns of High Costs of Siloing Operations in China Go back »

2025-01-09 | All chapters

European Chamber Warns of High Costs of Siloing Operations in China

Beijing, 9th January 2025 – The European Chamber today published its report Siloing and Diversification: One World, Two Systems, which highlights the high cost to businesses and the economy as a result of companies being compelled to silo their operations in China.

Geopolitical and trade tensions, and China’s self-reliance policies, coupled with growing domestic and global regulatory risks, are leading many multinational companies to separate certain China-based functions, or even entire operations, from those in the rest of the world. Some European Chamber members have invested considerably in this process so that they now resemble Chinese companies in all but name: they have localised their supply chains, workforce, sales and procurement functions, and have siloed their research and development, data and information technology systems, in an attempt to comply with evolving regulatory requirements and to be seen as a ‘reliable partner’ both in the eyes of the Chinese authorities, and their local partners and customers.

This is a considerable trade-off: siloing gives rise to an increase of both overall costs and global compliance risks, as well as the need to have duplicate operations and production, ultimately resulting in inefficiency, reduced innovation capacity and a loss of international competitiveness. And while this may see their products being qualified as ‘made in China’, it is not guaranteed.

Presenting foreign companies with no feasible alternative to siloing poses several risks to China’s economy and its companies too. Although some European companies are onshoring supply chains into China to increase resilience, a similar number are moving their supply chains out for the same reason. The outflow of foreign direct investment to other markets—which is already taking place—could increase if companies feel the costs of remaining are too high, leading to a significant loss of jobs and tax revenues for China. Meanwhile, it is plausible that other international markets will increasingly look into tools that can better protect their own companies against Chinese competition on their own turf.

“Many companies localise certain functions or even their entire operations in China for commercial reasons,” said Jens Eskelund, president of the European Chamber. “However, those that are compelled to silo are not following normal, commercial logic, and are often making themselves more easily replaceable by their competitors while surrendering their ability to operate as truly global entities.”

Download the report here.

 

中国欧盟商会醒企业:孤立运营体系成本高昂

北京,2025年1月9日——中国欧盟商会今日发布《孤立和多元化:一个世界,两种体系》的报告。该报告指出,企业迫于形势孤立其在华运营体系,会大幅提升企业和经济成本。

地缘政治和贸易紧张局势不断加剧、中国自立更生相关政策逐步强化、加之国内外监管风险与日俱增,诸多跨国公司将其中国市场的部分职能甚至整个运营体系与其全球业务体系剥离开。部分欧盟商会会员为此投入大量资金,现已与中国企业几乎别无二致:供应链、劳动力、销售和采购职能已实现本地化,研发、数据和信息技术系统已实现孤立化。他们希望能因此适应不断发展变化的监管要求,成为中国政府、地方合作伙伴及客户眼中“值得信赖的合作伙伴”。

这完全是一个权衡利弊的过程:实现孤立化需要重新建立运营和生产体系,这势必必提高总体成本,加剧国际合规风险。这将最终导致效率降低,创新能力下降,并失去国际竞争力。然而在诸多风险下,孤立化生产的产品是否符合“中国制造”的标准也无法保证。

目前在华外资企业除了孤立化外别无选择,这对中国经济和中国公司也构成风险。为增强供应链韧性,部分欧企将供应链移至中国,也有部分欧企将供应链移出中国。现已存在外商直接投资流出至其他市场的情况,如果企业认为留在中国市场的成本过高,这一情况将更为严峻,并将直接导致中国就业机会和税收骤减。与此同时,其他国际市场很可能会积极研究应对对策,以保护本国企业在本土免受中国竞争的冲击。

中国欧盟商会主席彦辞表示:“多数企业出于商业考量,将其中国市场的部分职能甚至整个运营体系本地化。然而,部分企业则完全实现了业务孤立化,这全然背离了正常的商业逻辑,在商业竞争中可能更容易被其竞争对手取而代之,甚至丧失了全球化运营能力。”

点击这里下载报告。

For more information please contact

Xinhe Fan