EU prepares rules to reduce dependence on China

The European Union is preparing plans to force companies in the bloc to buy key components from at least three different suppliers in a bid to reduce dependence on China, the Financial Times reported today.

The new rules would apply to companies in several key sectors, such as the chemical industry and industrial machinery, the report said, citing two EU officials familiar with the matter.

Under the new legislation, companies would be limited to buying around 30 to 40 percent of components from a single supplier, while they would have to source the rest from at least three different suppliers who do not come from the same country, the FT writes.

This comes as China continues to use its control over the processing of many minerals as a tool of pressure, at times restricting exports, driving down prices and undermining the ability of other countries to diversify sources of materials used to produce semiconductors, electric vehicles and advanced weapons.

European Trade Commissioner Maroš Šefčovič is planning a series of punitive tariffs on Chinese chemical products and machinery, in an effort to tackle the bloc's trade deficit of 1 billion euros a day ($1,16 billion) and protect companies from China's "weaponization of trade," the newspaper said.

Last month, Šefčovič signed a memorandum of understanding with US Secretary of State Marco Rubio on a partnership in the production and provision of critical minerals, as part of an effort to weaken Chinese control over materials crucial to advanced manufacturing.

According to the FT report, the plans, which are still in their early stages, will be presented at a Commission meeting dedicated to China on May 29, and could then be endorsed by EU leaders at the end of June.

A European Commission spokesman confirmed to Reuters that it would hold an orientation debate on EU-China relations on May 29, but declined to comment on internal discussions, adding that such discussions do not imply the adoption of formal proposals.