European firms unprepared for China shock as EU tries to cut reliance on Beijing

European businesses are struggling to prepare for potential geopolitical shocks following the U.S.-China trade and tech war, according to a Bertelsmann Stiftung survey. While 81% of respondents noted that Russia's war in Ukraine has impacted or will affect their operations, only 10% have taken concrete steps to prepare for a similar event in Taiwan.

On the topic of China, just 24% of companies plan to reduce dependence on Chinese suppliers, and only a third are considering strategic stockpiles of critical raw materials. This lack of action is concerning to study co-author Jacob Gunter of the Mercator Institute for China Studies, who expressed worry over the perceived complacency.

Nearly one-third of respondents reported negative effects from U.S.-China trade and tech restrictions, with around half of firms operating in China affected. The survey suggests that the EU is lagging in efforts to diversify its supply chains and reduce dependence on single suppliers, particularly in light of potential export control suspensions between the U.S. and China.

While the EU is preparing a diversification instrument to tackle supply chain vulnerabilities, trade Commissioner Maroš Šefčovič is set to meet with Chinese officials in October, raising questions about the EU's ability to influence these negotiations and navigate the complexities of the China trade deficit, estimated at around €1 billion a day.