FRANKFURT (Reuters) – More than 40% of global companies surveyed by the European Central Bank (ECB) plan to shift production to more politically welcoming countries in the coming years, with China risk cited as the main concern, according to a document published Monday.
Discussions within these multinationals have intensified since the COVID-19 pandemic, then the war in Ukraine, which disrupted supply chains.
The ECB reports in a survey of 65 very large companies with a global presence that 49% of them plan to “relocate” (“Near-shoring”), that is to say to bring production closer to their points of sale.
Among the companies surveyed, 42% wish to “relocate” only certain operations, or transfer them to more welcoming destinations.
“When it comes to countries that pose – or could pose – a risk to supply chains in their sector in general, two thirds of these companies cited China,” writes the ECB in an article in its Economic Bulletin.
More than half of companies source critical materials from a specific country or a limited number of countries, and almost all of them said these supplies are now at high risk.
“A large majority of them designated China as this country or one of these countries, and all consider it to be a high risk,” underlines the ECB.
Constrained “near-shoring” is not in itself a new thing, however its version based on voluntary participation is a relatively new trend since only 11% of companies declared having already adopted such a strategy over the last five years.
The European Union (EU) could be harmed by this new phenomenon because the number of companies seeking to relocate their production outside the bloc remains higher than that of companies wishing to set up there, which could have a “significant” impact on employment.
These movements could also fuel inflation, as almost half of companies said they expected these movements to lead to higher prices, the ECB survey said.
(Reporting by Balazs Koranyi; French version Claude Chendjou, edited by Blandine Hénault)
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