By South China Morning Post | Created at 2025-01-09 05:39:45 | Updated at 2025-01-09 18:01:52
12 hours ago
China is under pressure to give foreign companies the freedom to localise operations based on market needs, as restrictive regulations and market barriers erode confidence and force many to reassess.
European companies are increasingly being forced to silo their operations in China, part of a wider trend amid a tightening grip on national security, protectionist measures and regulatory fragmentation, the European Union Chamber of Commerce in China said in a report released on Thursday.
The report, based on surveys conducted between August and November and including responses from 128 member companies, added that siloing – the cutting off of China-based functions from operations in the rest of the world – is a strategic response by multinational companies to mitigate risks and comply with local regulations.
Chinese legislations have guided companies to pursue extensive localisation, in their supply chains, workforce, sales and procurement functions, and many have siloed their R&D, data and IT systems, in hopes of ensuring market access and potential inclusions in procurements.
If they do not comply, they face market barriers and the threat of penalties for non-compliance, according to the report.
Geopolitics and escalating trade tensions also compel companies to adjust their supply chains and research-and-development strategies to ensure operational resilience.
