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Euractiv: Chinese companies worried about EU due diligence proposal, survey finds

Euractiv| Updated: Oct 6, 2022

This article is part of our special report Chinese businesses in Europe.

According to a survey commissioned by the Chinese Chamber of Commerce to the EU (CCCEU), Chinese companies are concerned about the impact of the EU's directive on corporate sustainability on their business operations and called for a revision of the proposed rules that are partly targeted at tackling human rights abuses in China. 

According to the survey, an increasing number of Chinese companies in Europe are concerned over the due diligence proposal currently negotiated at the EU level to make businesses accountable for human rights violations throughout their value chain.

The report calls for a revision of the directive "to prevent it from aggravating enterprises' concerns on the requirements for value chain due diligence and increasing uncertainties."

Based on answers from 150 Chinese companies, the report claims the due diligence rules currently under discussion "may raise compliance costs for Chinese textile and photovoltaic entities to enter the EU market."

"It would be quite overwhelming for the companies," Liang Linlin, director of communication and research at CCCEU, told EURACTIV, adding that the rules would put a "very high burden on the companies to abide by the rules."

A Commission official acknowledged that companies might face additional costs due to due diligence procedures and investments to address adverse impacts.

However, the official also said companies could reduce these costs through collaboration, while sustainable practices will likely attract more consumers and help secure investors.

Market fragmentation

According to the report, Chinese companies are also concerned that the new rules on corporate accountability "may lead to market fragmentation."

However, according to the Commission, market fragmentation is caused by the lack of EU-wide rules. An official said a European framework would provide legal certainty to companies and help their financial performance.

Asked what the Commission should do to reassure Chinese companies while also ensuring supply chains are free from human rights violations, Linlin asked the executive to "listen to the concerns and the voice of Chinese companies in the EU."

"We would like to have a more open and fair dialogue," she said, adding that the CCCEU will submit the survey findings to the Commission.

Forced labour products

The report also mentioned the recently proposed ban on products made with forced labour, which was put forward by the EU Commission on 14 September to avoid goods tainted by human rights abuses reaching the internal market or being exported.

The prohibition would also apply to products manufactured in Xinjiang. In this Chinese region, several reports have uncovered mass surveillance, detention, and persecution of the Muslim Uyghur minority by the Chinese state.

Recently, a UN report said China's "arbitrary and discriminatory detention" of Uyghurs and other Muslims in the region might constitute crimes against humanity, and numerous rights groups have accused China of using forced labour in internment camps.

While the CCCEU study reports that the ban could lead to market fragmentation, similarly to due diligence rules, it does not look into the specific reasons of concern regarding the ban for European Chinese companies.

Linlin did not answer EURACTIV's question on whether Chinese companies were worried about possible limitations to sourcing from Xinjiang due to human rights violations.

[Edited by János Allenbach-Ammann and Alice Taylor]