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French companies prepare for Chinese invasion of Taiwan

Posted Jan 10, 2023, 7:21 AMUpdated on Jan 10, 2023 at 7:27 am

Tension has been mounting in recent months between China and Taiwan, the world’s second-largest power seeking to regain sovereignty over the island. A possible war is at the top of the risks identified by the purchasing departments of French companies. According to one study, 26% of them “have developed a specific procurement plan in the event of an invasion”.

The survey, led by the firm AgileBuyer and the National Purchasing Council, was conducted among 900 professionals, questioned between November 15 and December 6, 2022, including 42% working within large groups and 37% within medium-sized companies with between 250 and 4,999 employees.

For these companies, “Taiwan is one of the leading suppliers in terms of electronic components and in many sectors, such as aeronautics and the automobile”, recall the authors of the study.

The Ukrainian precedent

“For a long time, companies did not anticipate the risk: we had the yellow vests, the Covid, Ukraine, so there is now much more work on risk management,” said AFP. Olivier Wajnzstok, director of AgileBuyer. According to him, “the consequences of the war in Ukraine, it’s just a small aperitif compared to the consequences if there is an invasion of Taiwan”.

It is sometimes difficult to change supplier as in the case of certain electronic chips for which Taiwan has an overwhelming share of world production. But the purchasing departments try as much as possible to diversify their sources of supply.

Nearly one out of two companies plans to relocate its purchases. According to the study, we now speak of “friendshoring” to designate a relocation of supplies to a friendly country, a practice from which “India benefits in an extraordinary way”, according to Olivier Wajnzstok.

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The energy risk still at its highest

In addition to this risk of war between Taiwan and China, companies still face, in 2023, the risks associated with the high cost of energy. The good news is that “68% of purchasing departments are covered at 50% or more on their energy contracts”, according to the study. But not all companies have covered themselves in advance against the unexpected, underlines Olivier Wajnzstok. Nearly one in two purchasing managers say they are confronted with suppliers who “go so far as to break contracts”.

In general, suppliers are now often in a strong position to renegotiate their prices. 87% of companies surveyed say they are forced to renegotiate because of inflation and more than four out of five purchasing departments believe that some suppliers are taking advantage of a “bargain” and practicing “opportunistic inflation”, 15% even judging that this profiteering behavior prevails.

Likely failure of a Chinese invasion of Taiwan in the event of American aid

An invasion of Taiwan by China would likely be doomed if the United States were to defend the island. Military experts, assembled by the Center for Strategic and International Studies for a war simulation, pointed out that each party directly involved in such a conflict (the United States, China, Taiwan and Japan) would suffer “enormous” losses.

Avec AFP

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