European companies are insufficiently prepared for a potential escalation between China and Taiwan, according to a new study. This finding, reported by Politico and based on the European Business Survey conducted by the Bertelsmann Foundation, the China Institute Merics, the Dutch Institute Clingendael, and the Finnish Institute for Foreign Policy (FIIA), indicates that concrete preparation is lacking on a massive scale.
Only ten percent of the surveyed companies possess detailed strategies for such a scenario, with six out of ten stating they have no plans to make the necessary preparations. The survey included 228 European companies, 36 percent of which were based in Germany. The research concludes that while awareness of economic security risks is growing, practical precautions are often absent.
Managing geopolitical risks is currently discussed regularly at the management level in only about one-third of the surveyed firms. Furthermore, just 24 percent plan to reduce their dependency on Chinese suppliers, and approximately one-third consider building up strategic reserves of critical raw materials.
Jacob Gunter of the China Institute Merics, a co-author of the study, told Politico that companies are now clear that geopolitical conflicts can directly impact their business. However, he stressed that this newfound awareness has not translated into significant action. “From my perspective, the lack of visible measures is very worrying,” Gunter stated. He expressed surprise that companies are not increasing their stockpiles or diversifying their supply chains, despite a clear understanding of which products are central to ongoing trade and technology disputes.
The impact of geopolitical conflicts on the economy was demonstrated by the Russian invasion of Ukraine, according to the study’s authors. A substantial 81 percent of the surveyed companies reported that the war and its resulting sanctions negatively affected their operations.
Moreover, the conflict between the US and China is increasingly viewed as a business risk. Nearly one-third of the surveyed companies are already feeling the negative consequences of mutual trade and technology restrictions, with this proportion rising to around 50 percent among firms operating in China.
