Companies in China Unable to Find De-risking Methods, Just Packing Up?

1 in 10 European Companies Recovering Funds
22% "Considering Withdrawal from Jung Market"
12% of US Companies Considering Relocation of Manufacturing Facilities

As geopolitical tensions have recently intensified, global companies are increasingly withdrawing from the Chinese market. Although Western countries such as the United States and Europe are shifting their China strategies from decoupling to de-risking, analysts say that companies unable to find appropriate methods are focusing solely on exiting the Chinese market.

According to a report released this year by the European Chamber of Commerce in China on the 25th (local time), one out of ten European companies had already repatriated investments made in China and relocated them overseas last year. Additionally, 22% of all companies responded that they are considering withdrawing from the Chinese market. This is the first time since the survey began in 2016 that the percentage of companies planning to expand investments in China did not exceed half.

American companies are also reportedly considering reducing their investments in China. According to the American Chamber of Commerce in China, 12% of U.S. companies surveyed last year said they are considering relocating manufacturing facilities outside China. Another 12% responded that they have already completed the relocation of manufacturing facilities.

This trend has simultaneously appeared across various industries such as semiconductors and pharmaceuticals. Taiwan's Foxconn, which manufactures Apple devices, is relocating production bases from China to Vietnam. Since May last year, it has started producing MacBooks in Vietnam and is also considering establishing production lines in Thailand. The American toy company Hasbro has reduced its production volume in China from 69% in 2018 to around 60%.

There is also a growing movement to source materials and components from third countries rather than China. The German Mechanical Engineering Industry Association explained, "One-third of our member companies are seeking to procure parts from third countries so that they can sell products in both the Chinese and U.S. markets."

Some companies are exploring ways to separate their Chinese subsidiaries due to concerns over sanctions against China. Swedish global pharmaceutical company AstraZeneca is discussing plans to spin off its China business and list it as a separate entity in Hong Kong.

Experts analyze that global companies have not yet devised concrete de-risking strategies and are only adopting defensive postures to minimize geopolitical conflicts. Akate Demarais, a senior researcher at the European Council on Foreign Relations, a European think tank, said, "European companies are still pondering what de-risking means and how to respond. Although private companies have engaged in many discussions over the past year, it will take several more years for de-risking strategies to be implemented in investment sectors."

Major foreign media outlets also reported, "Western countries are employing de-risking strategies to avoid major conflicts with China, but companies have yet to establish practical strategies for de-risking, focusing instead on how to protect themselves if their Chinese operations are halted."