EU companies in China should ‘prepare for the worst’ in digital decoupling: Reuters report

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© Reuters.

BEIJING (Reuters) – The digital decoupling between China and the United States could seriously affect EU companies in China and they should “prepare for the worst” and could be forced into a costly separation of their international operations, European business groups said. While the political, commercial and financial decoupling is worrying, the rivalry between China and the US in the sphere of technology will cause the most unrest, said the European Chamber of Commerce in China and MERICS, a think tank based in Berlin, in a report published Thursday. . Just as the United States is trying to purge its networks of Chinese-made software and components, China, which is heavily reliant on semiconductor imports, is pushing for digital self-sufficiency, he said. European companies are caught in the middle. House Speaker Joerg Wuttke, speaking at a briefing prior to the report’s release, warned of a “looming storm.” Data flows, ICT equipment and digital goods and services would be the places where decoupling would hurt businesses the most, he said. Companies are already grappling with some of these problems, and different definitions of “data” already have a “significant negative impact” on nearly half of the companies surveyed, the groups said in the report. They said 19% of companies had abandoned or postponed new projects, goods or services due to China’s regulations on personal information. “As the world moves towards increasing techno-nationalism, the possibility of complete digital disintegration requires serious analysis,” they said in the report, which is released two weeks after the EU and China reached an agreement to give the European companies greater access to Chinese markets. A US “clean web” proposal aims to build a global digital alliance that excludes technology that Washington considers manipulated by China’s communist government. Protectionism in China is already making it difficult for companies to use European digital solutions and networking equipment, said Jacob Gunter, also on camera. European companies may be forced to choose between completely separate operations in China and the rest of the world, or find ways to use a more “neutral” architecture, according to the report. “The costs of either option are considerable. Each step down the path of decoupling inflicts further damage on innovation, efficiency, cost savings and economies of scale,” he said. “We’re on a downhill ride … it’s picking up speed,” Wuttke said. “I don’t see any exit ramps right now.”

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