Eu-China Trade Tensions and Geopolitics: The Growing Impact on Corporate Sustainability and Competitiveness

The session opened with a contribution from a senior EU official discussing the current EU-China trade relations, which were described at a historic low, with bilateral dialogue yielding little progress. China continues to dismiss EU concerns while actively encouraging foreign companies to localise production and pursue self-reliance, a dynamic that is deepening European corporate exposure and dependencies on Chinese resources. The figures reinforce this: Chinese exports to Europe have risen 14%, EU exports to China have declined sharply, and the bilateral trade deficit now stands at nearly €400 billion annually.

The centrepiece of the discussion was China's newly enacted ''Regulation on Security of Industrial and Supply Chains'' (April 2026), which represents a significant escalation in regulatory risk for companies operating in or sourcing from China. The regulation formally elevates supply chain security to a matter of national interest, granting Chinese authorities sweeping powers to investigate companies, mandate information disclosure, restrict transactions, and impose countermeasures against any entity deemed to threaten the integrity of China-linked supply chains. This means that companies fulfilling EU due diligence obligations face significant risks if Chinese authorities consider it a hostile act, potentially triggering retaliation of uncertain scope and form.

European companies therefore find themselves navigating the dilemma of regulatory obligations from Brussels and Beijing's retaliatory toolkit, all against a backdrop of deep and difficult-to-unwind dependencies on China. The EU stance on this issue was clear: it will not act by revising current legislation but rather pursue strategic autonomy, trade defence instruments, and progressive disengagement, through policies like the Industrial Accelerator Act. The key message from this insightful discussion is unambiguous: geopolitics, trade policy, and sustainability are increasingly interconnected and key drivers of supply chain resilience and corporate competitiveness.