Europe and the US would need to find another $23.6tn in the next 25 years to stop relying on China in critical industries.
The numbers come from EY-Parthenon, which looked at what it would cost to copy the infrastructure, research, software, manufacturing and supply chains now tied to China.
According to the Financial Times, the consultancy reckons the US would need $13.7tn, the eurozone $9.1tn and the UK $800bn by 2050.
For the US, the bill would come to about $550bn a year. That is not far off the $600bn big US technology outfits poured into data centres in 2025.
For the EU, the required spending would nearly double its annual budget, EY-Parthenon said.
The size of the bill shows how much Western governments have boxed themselves in as they try to cut China’s grip on strategic supply chains.
EY-Parthenon adviser Mats Persson, a former Downing Street adviser, said: “Localising supply chains without putting prohibitive costs on taxpayers and consumers will be one of the most formidable challenges for businesses and governments alike in coming years.”
EY-Parthenon analysts wrote that the collective extra investment, averaging $940bn a year for 25 years, was in theory “not insurmountable”.
That still means piling the cash on top of existing spending on energy, technology, defence and infrastructure.
Persson said the first annual outlays would be smaller, then grow as the process became larger and more complicated.
Europe and the US got a nasty reminder of their exposure last year when Beijing put export controls on critical rare earth metals.
That move came after US President Donald Trump threatened 145 per cent tariffs on imports from China.
Car production lines in both economies came close to stopping before Beijing and Washington agreed a truce.
The scare gave fresh urgency to US and European efforts to reduce risk from China, including an EU scheme to stockpile rare earths.
The International Energy Agency reckons China will supply more than 60 per cent of the world’s refined lithium and cobalt by 2035.
Those materials are needed for cleaner energy, while China is expected to provide roughly 80 per cent of battery-grade graphite and rare earth elements.
Natixis Asia Pacific chief economist Alicia García-Herrero said the West could not decouple from China quickly, even with enormous investment.
Beijing’s grip on many critical industrial materials is simply too tight.
“The challenge is not just how much it would cost, but about China’s ability to intervene to stop such decoupling because of its existing control over the supply of everything from rare earths processing to active pharmaceutical ingredients,” García-Herrero said.
EY-Parthenon found that Chinese-made goods usually enjoy a 20 to 100 per cent factory-price advantage over Western rivals.
Cutting reliance on Chinese manufacturing would push up prices and add to inflation, which is just what central bankers need.
In Europe, reducing reliance on China could leave prices 1-2.5 per cent higher in critical sectors.
The report said this could leave the European Central Bank and Bank of England permanently above their two per cent inflation targets, citing European Central Bank analysis.
Western economies would need to spend on factories and physical infrastructure, but that would only be part of the bill.
They would also need to invest in worker training and factory automation.
Persson said the scale of the challenge made “partial decoupling” from China more likely.
Businesses would need to be pickier about where they spend their cash, especially when trying to protect themselves from possible Chinese chokepoints.
