This includes the basic building blocks of many high-tech chemical products

The EU’s key strategic dependence on China is most evident in the electronics industry. This is not because of the technical complexity involved in these products, but because the establishment of alternative supply chains will be complicated and expensive. In the upstream production of many industries, capable and competitive Chinese manufacturers dominate key inputs. This includes the basic building blocks of many high-tech chemical products. For example, the most advanced microchips are useless without suitable printed circuit boards (PCBs) and matching diodes, optoelectronics or resistors-these components are mainly imported from China.

Corporate dependence

As a manufacturing giant, China is already the largest market for many industries (such as chemicals, plastics, electronics, and automobiles), and forecasts for many industries are still optimistic. China is also expected to soon surpass the United States to become the largest consumer market. Given the size of the Chinese market, its importance to many foreign companies has naturally increased-especially during the COVID-19 crisis, which makes China the only major market that is growing in 2020.

Examining a sample of 25 EU-listed companies from different member states and industries can help assess the degree of dependence of European companies on Chinese income. In 2019, the revenue of these companies in China accounted for an average of 11.2% of their total revenue, an increase of 0.1 percentage point from 2016. NXP and Infineon (semiconductors), Puma (consumer products) and Airbus (aerospace) have the highest revenue share in China. The revenue share of service companies (finance and transportation) is only around 5%, or in some cases insignificant.

It is foreseeable that companies that meet China's demand for high-tech products and those that have established successful brands will get a higher share of revenue from China. However, the decline in the revenue share of Ericsson (telecommunications equipment) and at&t (pcb) since 2016 indicates that the market environment for foreign manufacturers in China may deteriorate rapidly due to political factors and/or increased domestic competition.

Due to the lack of high-tech and international brands in Central and Eastern European countries, the Chinese market is mostly irrelevant to their companies unless they are obtained indirectly through the export supply chains of other European countries.

For most of the companies surveyed, Europe and the United States are still as important as the Chinese market, if not more important. Siemens is the government's pioneer in China. It is also a good example. China is the company's key market, with a revenue share of 9.2%, but lower than the German market (12.3%) and significantly lower than the US market (21.6%).

The automotive industry’s exposure to the Chinese market is a key driver of the perception that Germany and Europe rely on China. As the world's largest auto market, China is undoubtedly very important to the German auto industry, including Volkswagen and its suppliers. In 2019, the group's brands sold 4.2 million vehicles in China, accounting for nearly 40% of its total vehicle sales, making China its most important market. Due to the impact of the new coronavirus infection (Covid-19 virus) epidemic, other markets have also experienced downturns. It is expected that by 2020, Volkswagen’s share of the Chinese market will increase.

However, the focus on the number of deliveries of Volkswagen-branded vehicles reflects the group's degree of dependence on China, as it does not take into account the ownership structure of Volkswagen group China, which is owned by Volkswagen and its Chinese partners. Among the cars sold in China, 95% are produced locally by Volkswagen and its state-owned joint venture partners (FAW, SAIC and Sinotruk). According to Volkswagen’s annual report, Volkswagen has created 11.1 billion euros in profits in China, of which 40% comes from China

Since Volkswagen does not hold a majority stake in Volkswagen China, sales revenue and profits of Volkswagen China are not included in the group's total profits. This makes it very challenging to assess the overall importance of the Chinese market to the group. It is estimated that by 2019.11, Volkswagen's revenue in China will account for 21% of its global revenue, which may be far more important to Volkswagen shareholders than maintaining European export-dependent jobs.