The global outbreak of coronavirus is prompting Europe to concede that the time to break dependence on China has come.
Chinese manufacturers and suppliers have shut down factories and offices in an effort to contain the spread of the disease formally known as COVID-19, wreaking havoc on industries including the technology sector and pharmaceutical sector, which have intricate supply chains in the key global hub.
Already, the coronavirus has caused exports from China to plummet: Exports fell by 17.2 percent in January-February compared with a year ago, according to data updated over the weekend by Chinese authorities.
Even as the rate of infection inside China has fallen and shipping from the countrys coast is creeping back, the disruption is prompting top European officials to call for a reckoning with the Continents dependency on China.
“There will be a before and an after the coronavirus [outbreak] in global economics,” French Finance Minister Bruno Le Maire told radio station France Inter on Monday. “We have to decrease our dependence on a couple of large powers, in particular China, for the supply of certain products” and “strengthen our sovereignty in strategic value chains” like cars, aerospace and medicines.
Eurozone finance ministers warned about a “potentially significant impact” on economic growth from the outbreak
Last week, eurozone finance ministers warned about a “potentially significant impact” on economic growth from the outbreak, citing the disruption of supply chains as an important factor.
In the tech sector, the shutdowns have pummelled the market values of some of the worlds biggest tech companies, as Apple, Microsoft and Google all grapple with disruption and seek to move at least some of their production out of China, to countries like Vietnam and Thailand. Apple warned its investors last month that worldwide iPhone supply would be “temporarily constrained.”
“Unfortunately, there will be broad, global economic effects stemming from this epidemic,” said Jason Oxman, president of the Information Technology Industry Council (ITI), a lobby group that represents most of Silicon Valleys largest firms. “While other countries in the region have manufacturing capacity, nothing matches Chinas scale or sophistication.”
Germanys digital association Bitkom underscored dire consequence for tech firms, estimating in a survey that one in four companies out of 80 surveyed had stopped receiving orders from China, while many also faced issues with suppliers in other countries.
In the midst of an already heated debate in Europe and across the West about over-reliance on Chinese tech equipment, the mounting supply chain problems are fueling arguments for greater independence from Beijings manufacturing might.
French Economy and Finance Minister Bruno Le Maire at a press conference about the economic impact of coronavirus | Eric Piermont/AFP via Getty Images
While the prospect of “decoupling” — or the untangling of deeply intertwined supply chain relationships that bind the West to China — seems premature, the virus is prompting a reappraisal of reliance on a single country.
“There is an overdependence on China, and we need an answer to that,” Chief Security Officer of Deutsche Telekom Thomas Tschersich told POLITICO. “We need to be willing to invest in Europe to balance out the dependency on China. But we also need Chinese suppliers for balance.”
Supply chain security an untrained muscle
The reappraisal comes after more than a year of intense debate about the security risks associated with using Chinese-made equipment in Europes 5G telecoms networks.
While large EU countries including France, Germany and the United Kingdom have stopped short of banning 5G equipment made by Huawei, European security officials have jointly called on the telecoms industry to limit its dependency on Huawei, which built up a large market share in Europe in the rollout of 3G and 4G.
But even Huaweis competitors, Swedens Ericsson and Finlands Nokia, are reliant on suppliers in ChiRead More – Source