Publication

China’s relationship with the West remains increasingly complex, and directors continue to cite China as a top concern. Heightened tensions with Taiwan, dependence on China for critical goods, the challenge of formulating effective derisking strategies, and China’s patient, often deceptive strategic moves create challenges for companies and boards. One audit chair summed up the situation, saying, “This is a subject I’ve devoted much time and attention to. It’s a great concern to all multinational companies. Lots of bad things can happen.”

On July 12, 2023, members of the European and North American Audit Committee Leadership Networks (EACLN and ACLN) met with Theresa Fallon, founder and director of the Centre for Russia Europe Asia Studies to discuss the evolving relationship with China and implications for European and American companies. In the spirit of open dialogue that characterizes the network, we encouraged Ms. Fallon to share her own views, however controversial. As with any guest, we emphasize that neither network members, EY, or Tapestry Networks endorses every statement a guest might make.

This ViewPoints synthesizes discussions around three themes that emerged during the meeting and premeeting conversations:

• China’s intent and tactics are difficult to read, making it riskier to do business.

• A Chinese invasion of Taiwan remains a top concern for audit chairs.

• Reducing corporate reliance on China is crucial, but effective derisking strategies are elusive.