Some European firms consider moving production out of China: business group
Epidemic causes challenges for companies’ operation: association
Published: Feb 23, 2020 12:48 PM

Photo taken on Nov. 7, 2018 shows a BMW i8 plug-in hybrid sports car at the first China International Import Expo (CIIE) in Shanghai, east China. (Xinhua/Xing Guangli)

Amid the outbreak of COVID-19 in China, some European companies are facing tremendous challenges in their operations in China - ranging from difficulty in returning production to a disruption in the global supply chain that weighs on their output, a European business group told the Global Times over the weekend. 

Some European firms questioned certain coordination issues from different levels of Chinese local governments, which they said are "unnecessary" and repetitive, having led to a halt in the movement of goods across China while foreign companies are trying to resume operation in a safe manner.

"We welcome the Chinese government's [decision to] put the management of COVID-19 at the top of priorities. But the virus itself has presented significant challenges to European companies' normal operations in China. Many employees have remained in their hometowns, or have not been able to return to the office," a spokesperson from the European Union Chamber of Commerce in China (EUCCC), told the Global Times. 

Some European companies are hit the hardest as they are suffering from plummeting commodity prices and contracted sales due to COVID-19, the spokesperson said.

The far-reaching fallout of the virus is on the supply chain, which has forced many European companies to reconsider their reliance on China's supply chain in their long-term planning, industry insiders said. 

China, dubbed as the world's factory, plays a pivotal and indispensable role in the global supply chain of almost everything from electronic products, manufacturing goods to daily necessities. 

In the auto industry, while auto component companies managed to get their factories running, other critical suppliers from China are lagging, which may ripple upstream producers and cause a "bottleneck" in global production, the spokesperson exemplified.  

The boiling China-US trade war has caused many to think about shifting some production lines out of China, and the COVID-19 outbreak has reinforced such a problem, according to the spokesperson. 

"But China's industrial clusters will be difficult to replace. It does not necessarily mean that European companies will be moving extensive parts of their supply chains out of China [at the current stage], but it is more likely that they will look elsewhere to diversify in the future," he explained. 

Concerns are also growing among European companies over "coordination issues" across different jurisdictions and levels of local government, or even from district to district in individual cities.

Some lamented in particular in the logistics sector, where delivery drivers need to undergo a quarantine for 14 days when traveling across different parts of China, which has brought the movement of goods in China to a near standstill. 

Despite the daunting challenges, European investors' interests and confidence in the Chinese market will not be changed or shaken because of the new epidemic, observers said.

"Most European companies in China are here to mainly serve the [massive] Chinese market," the spokesperson said. He noted that some European medical devices and pharmaceutical companies are seeing rising opportunities in China as Chinese authorities increase the rate of drug approvals to better maintain public health amid the coronavirus outbreak.