Insee Analyses · January 2024 · n° 93

The effects of the shortage of Chinese inputs on French firms in early 2020: what lessons can be drawn ?

From January 2020 onwards, restrictive measures linked to the Covid-19 pandemic brought part of China's economic activity to a standstill. Between February and June 2020, imports by French firms sourcing from China fell by 23.1%, 7.4 percentage points more than those sourcing from non-Chinese suppliers. These firms also reduced their sales in France and abroad by an average of 5%, relative to other companies. This was largely due to a temporary withdrawal from less important markets.

In general, firms can protect themselves from the consequences of such a shock either by diversifying their sources of supply, or by building up inventories. In the case of the episode studied, having a geographically diversified supply prior to the shock only reduced the loss of activity when substitutes for standardized Chinese inputs were available. Having a high level of inventories before the crisis was effective and prevented a drop in exports.