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Supply chain diversification away from China is progressing from talks to action, EU chamber says

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8 months ago

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Unmanned trucks transport containers at Dapukou Container Terminal in Zhoushan Port, Ningbo, Zhejiang, China, on December 9, 2025.

Nurphoto | Nurphoto | Getty Images

BEIJING — Supply chain diversification away from China is about to move from just talk to action.

That’s what Jens Eskelund, president, European Union Chamber of Commerce in China, told reporters on Tuesday ahead of the launch of a report on supply chain risks, and as businesses look ahead to the new year after a tumultuous 2025.

“Dependencies are being discussed in much more detail than they were before … Are we even sure Europe can manufacture toothpaste without ingredients sourced in China?” Eskelund said.

Reflecting continued global demand, China’s trade surplus for the year through November reached a record $1 trillion, according to official figures released Monday. That means the country exported far more than it imported, despite U.S. tariffs.

“The higher that production goes up, the higher the risk that countries will begin to react,” Eskelund said. He pointed out China faced a record high of 198 World Trade Organization trade investigations last year, well over half of which were from developing countries.

Other figures cited by the EU Chamber in its report Wednesday showed that China’s share in containers shipped globally was creeping up — at 37% for the first three quarters of this year, up from 36% at the end of 2024 and 31.7% before the pandemic in 2019.

A weak Chinese currency and domestic overproduction contributed to that growth, the chamber said. It recommended members “eliminate single-source dependencies” on the U.S. and China, and called on EU policymakers to “accelerate plans to identify and eliminate critical dependencies.”

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Investors have heard this conversation before.

During Covid-19, businesses started to realize how reliant they were on products and parts from China, when stringent lockdowns to control the virus disrupted production. The stakes for businesses and their home base governments are far higher now compared to the pandemic, Eskelund said.

“That’s actually a big shift, from you’re concerned primarily about whether you have a supply chain that can physically deliver the product, and then whether your supply chain is dependent on a certain government position,” he said.

As tensions between the U.S. and Beijing rose over tariffs and trade barriers this year, Beijing ramped up export controls, including on critical rare earths, bringing into light the global dependency on Chinese production.

A survey by the American Chamber of Commerce in Shanghai earlier this year found that a record share of respondents — 47% — had diverted investments planned for China.

At the start of the year, the EU Chamber’s member survey found that business sentiment was at a record low, with a record 73% of respondents saying doing business in the Asian country had become more difficult.

Still, more than a quarter of the respondents said they were increasing onshoring in China, largely to meet Beijing’s localization requirements, with just 10% looking at supply chains outside China — that is changing now.

In November, the chamber conducted a brief survey of 131 members about the impact of China’s export controls and found that about a third of the respondents planned to look outside China for supplies or developing capacity outside the country.

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It’s less clear whether diversification means reshoring.

“The reality is nobody is reshoring it’s all friendshoring,” said Cameron Johnson, Shanghai-based senior partner at consulting firm Tidalwave Solutions. “They’re going to Mexico, they’re going to Southeast Asia.”

“You should expect Chinese supply chains to become more dominant,” he said, adding that companies will try to better map out their entire supply chain, rather than just focusing on specific parts. Chinese firms might be the ones partnering with those overseas factories, or setting them up.

The EU trade body said that about half of its members reported their China-based suppliers were now shifting production to other markets.

Eskelund pointed out that car companies from different countries, increasingly including China, have taken this approach. “Here Chinese companies might be a little ahead of their own government,” he said.

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Private Credit Expansion and Regulatory Oversight in 2026 Capital Markets

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5 days ago

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August 9, 2026

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The global private credit market has solidified its role as a fundamental pillar of enterprise finance, expanding rapidly across middle-market lending, asset-backed finance, and infrastructure financing. As non-bank financial institutions capture a larger share of corporate debt origination, global regulatory bodies are increasing oversight to evaluate market transparency and systemic risk interconnections.

Growth Drivers in Direct Lending
Direct lending platforms have continued to attract substantial institutional allocations from pension funds, sovereign wealth entities, and insurance companies seeking attractive risk-adjusted yields. Private debt funds offer corporate borrowers customized financing structures, faster execution timelines, and confidentiality compared to syndicated loan markets.

In 2026, private credit managers are increasingly financing larger corporate transactions, providing multi-billion-dollar credit facilities for buyout deals and corporate restructurings. The flexibility of private debt contracts—featuring unitranche pricing and tailored covenant packages—has made direct lending the preferred capital source for middle-market enterprise sponsors.

Regulatory Scrutiny and Systemic Risk Assessment
The rapid growth of non-bank intermediation has drawn heightened scrutiny from financial regulators in North America and Europe. Because private debt agreements are negotiated privately without public exchange disclosures, central banks are evaluating potential vulnerabilities related to asset valuation consistency and fund liquidity profiles.

Regulatory agencies are introducing guidelines aimed at improving reporting standards for private investment vehicles managing institutional assets. Key focus areas include monitoring leverage ratios within private credit funds and evaluating indirect credit exposures between commercial banking institutions and private debt funds.

Navigating Elevated Refinancing Costs
With benchmark interest rates remaining elevated, private debt borrowers face higher debt service obligations on floating-rate credit facilities. Financial advisory firms report an increase in proactive liability management strategies, including payment-in-kind (PIK) interest options, equity infusions from sponsors, and covenant modifications.

Private credit managers with deep operational capabilities are actively working alongside portfolio companies to optimize working capital and maintain cash flow coverage ratios during periods of higher borrowing costs.

Key Financial Takeaways
1. Mainstream Asset Class: Private credit has expanded beyond niche alternative asset status into a core corporate finance solution.
2. Enhanced Transparency Standards: Regulatory frameworks are evolving toward greater disclosure requirements for private debt managers.
3. Proactive Risk Management: Lenders and sponsors must prioritize debt sustainability and active portfolio monitoring amid high benchmark rates.

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Finance

Venture Capital and Startup Valuations in 2026: Focus on Unit Economics and Sustainable Growth

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1 week ago

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August 5, 2026

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The global venture capital (VC) ecosystem is operating under a disciplined investment framework in 2026. Following years of valuation adjustments and shifting liquidity environments, venture capital firms and private equity investors are prioritizing proven unit economics, positive cash flow pathways, and capital efficiency over rapid, unconstrained user acquisition.

The Shift Toward Disciplined Startup Valuations
Early-stage and growth-stage startup valuations have stabilized at sustainable historical averages. Venture capital partners are conducting rigorous due diligence processes before deploying capital, scrutinizing gross margins, customer acquisition costs (CAC), net revenue retention (NRR), and lifetime value (LTV) metrics.

While total capital deployed remains robust, seed and Series A funding rounds are taking longer to finalize. Founders are expected to demonstrate clear product-market fit and defensible intellectual property rather than relying on top-line revenue projections unsupported by strong underlying economics.

M&A Activity and Liquidity Solutions
The market for venture-backed exits is seeing renewed momentum through strategic mergers and acquisitions (M&A) and secondary market liquidity facilities. Established corporate enterprises are acquiring high-performing technology startups to integrate proprietary artificial intelligence models and specialized software solutions into their product ecosystems.

Simultaneously, secondary market transactions have become an essential liquidity mechanism for early employees and institutional investors. Specialized secondary funds are purchasing pre-IPO shares at discounted valuations, providing liquidity opportunities while companies remain private for longer durations.

Sector Allocation: Deep Tech, Clean Energy, and Enterprise Automation
Venture capital investment is heavily concentrated in deep technology and capital-intensive engineering sectors. High-growth investment themes include:
– Next-Generation Semiconductors: Hardware startups designing specialized AI processors and energy-efficient microchip architectures.
– Clean Technology: Battery chemistry innovations, carbon capture solutions, and grid-scale energy storage startups.
– Enterprise Process Automation: Software platforms that automate complex workflows in healthcare, financial services, and industrial logistics.

Key Insights for Entrepreneurs and Investors
1. Prioritize Capital Efficiency: Startups focused on achieving operational profitability receive higher valuation premiums from institutional investors.
2. Strategic Exit Planning: Corporate M&A is serving as a primary exit route for venture-backed startups navigating prolonged IPO windows.
3. Focus on High-Moat Technologies: Deep tech and proprietary software architectures are securing the majority of growth-stage capital allocations.

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Finance

The Evolution of Digital Payments: Cross-Border Settlement and Central Bank Digital Currencies in 2026

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1 week ago

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August 5, 2026

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The infrastructure supporting global commerce is undergoing a major technological upgrade as real-time digital payment rails, cross-border settlement solutions, and Central Bank Digital Currency (CBDC) pilot programs achieve widespread commercial adoption. Financial institutions and fintech developers are reimagining payment processing to eliminate friction, lower transaction fees, and accelerate settlement speed.

Transforming Cross-Border Settlement Infrastructure
For decades, international corporate payments relied on legacy correspondent banking networks characterized by multi-day settlement delays, opaque fee structures, and high foreign exchange markups. In 2026, modern cross-border payment networks are enabling near-instantaneous settlement for international trade transactions.

Financial technology platforms are leveraging distributed ledger technology and real-time gross settlement (RTGS) interconnections to settle transactions in seconds. International trade participants benefit from reduced working capital requirements and minimized foreign exchange volatility risks during cross-border transfers.

Commercial Expansion of Central Bank Digital Currencies
Central banks representing major global economies are advancing CBDC initiatives from research phases into active commercial deployment. Wholesale CBDCs—designed specifically for interbank settlement and financial institution clearing—are demonstrating substantial efficiency gains in domestic and international transactions.

At the retail level, several nations have introduced public digital currency options alongside existing commercial banking networks. These sovereign digital payment channels aim to expand financial inclusion, lower consumer transaction fees, and improve the efficiency of government-to-citizen financial disbursements.

Open Banking and Embedded Finance Ecosystems
Alongside settlement infrastructure upgrades, open banking regulations and embedded finance frameworks are transforming merchant-consumer interactions. Commercial businesses across retail, travel, and business-to-business (B2B) services are integrating seamless payment APIs directly into their customer software interfaces.

Through open banking frameworks, consumers can initiate secure bank-to-bank payments without relying on traditional credit card networks, significantly reducing merchant processing fees. Integrated Buy-Now-Pay-Later (BNPL) options and point-of-sale credit facilities continue to expand, driving higher conversion rates for digital commerce platforms.

Strategic Financial Takeaways
1. Treasury Optimization: Corporate treasurers should leverage instant cross-border payment platforms to minimize liquidity buffers and foreign exchange exposure.
2. CBDC Integration: Financial institutions must prepare internal core banking systems to interface with emerging wholesale CBDC payment rails.
3. Merchant Fee Reduction: Enterprise merchants can lower payment processing overhead by adopting account-to-account (A2A) open banking checkout solutions.

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