European firms intensify efforts to reduce dependence on China

European buyers are seeking to reduce their dependence on China, as Brussels increases scrutiny of goods from the world’s largest export economy. With probes investigating Chinese government subsidies for manufacturing and the European Commission expected to disclose further tariffs on Chinese vehicle imports, companies are looking for alternatives.

Richard Laub, chief executive of Belgium-based Dragon Sourcing, noted a trend of companies reducing their reliance on China, following the lead of the US in decoupling. European customers, particularly in non-food retail industries, are concerned about their exposure to China, with some companies spending 80-90% of their sourcing budget on Chinese goods.

William Fung, deputy chair of Fung Group, highlighted the need for diversification away from China, as companies aim to reduce risk and avoid potential impacts on their supply chains. Naveen Jha, a clothing and textiles sourcing business owner in China, mentioned that European businesses are increasingly turning to countries like India, Bangladesh, and Vietnam for their garment sourcing.

While European companies have benefited from the price competitiveness of Chinese goods, some are still looking to reduce their dependence in certain industries like chemicals, pharmaceuticals, and electronics. Analysts caution that efforts to de-risk may not severely impact China’s overall exports, as the country continues to expand its manufacturing presence in alternative hubs like Vietnam and Mexico.

Despite the push to diversify sourcing away from China, the appeal of the Chinese production base remains strong, particularly for complex products. As companies navigate this shift, the global supply chain landscape is evolving, with the destination of Chinese goods changing but the overall production levels remaining steady.