China hits back at West’s de-risking strategy at supply chain expo

Chinese Premier Li Qiang delivers the keynote speech at the opening ceremony of the first China International Supply Chain Expo (CISCE) in Beijing, China Nov 28, 2023. REUTERS/Florence Lo

BEIJING  -China opposes protectionism and wants to strengthen supply chains with all countries, Premier Li Qiang said on Tuesday, as a growing number of nations voice concern at how much their supply chains depend on the world’s second largest economy.

Li’s comments comes amid calls over the past year from the United States and the European Union to reduce their dependence on China in certain sectors and “de-risk” their supply chains, as well as efforts to cut off Chinese enterprises from some advanced semiconductors.

“We are willing to build closer production and industrial supply chain partnerships with all countries,” Li told the first China International Supply Chain Expo (CISCE), adding that the international community needs to be “more wary of the challenges and risks brought about by protectionism and uncontrolled globalization.”

Recent geopolitical tensions, from Russia’s war in Ukraine to concerns over a future Chinese invasion of Taiwan, have led a growing number of foreign businesses to opt against expanding their supply chains in China, instead directing investment to countries including India, Mexico and Vietnam that enjoy better ties with the United States, a strategy known as China-plus-one.

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The expo, organized by the state-run China Council for the Promotion of International Trade (CCPIT), is Beijing’s latest bid to increase foreign investment in China, which has dropped to historic lows.

The value of announced U.S. and European greenfield investment into China dropped to less than $20 billion last year, from a peak of $120 billion in 2018, according to Rhodium Group, while investment into India shot up by some $65 billion or 400 percent between 2021 and 2022.

Despite this decrease, China remains an attractive option: a survey conducted by HSBC bank at the China International Import Expo (CIIE) earlier this month showed 45 percent of firms expect to expand their supply chain in China over the next year.

“I think there is a lot of hyperbole around this. And I’m not sure whether the (de-risking) measures the EU or U.S. are considering match the scale of the risk,” said Dan Marks, research fellow for energy security at the Royal United Services think tank.

An apparent improvement in U.S.-Sino ties, after Chinese President Xi Jinping recently met U.S. President Joe Biden and participated in the Asia-Pacific Economic Cooperation (APEC) Summit, should also help reinforce China’s position as a key manufacturing hub.

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Zhang Shaogang, a CCPIT official who was part of the Chinese delegation at the APEC summit, said last week that 20 percent of the foreign firms exhibiting at the supply chain expo were U.S.-based, and included Amazon, Apple, Tesla, and Intel.

“We wholeheartedly hope U.S. businesses can…while actively realizing their own development, also positively promote the healthy, stable, and long-term development of U.S.-China relations,” Zhang said.