European Companies Deepen Ties with China’s Supply Chains Amid Shifting Global Dynamics
BEIJING – A significant wave of European businesses are opting to maintain or even bolster their supply chain operations within mainland China, a strategic pivot driven by the imperative to remain competitive on the global stage. This trend, detailed in a recent survey by the European Union Chamber of Commerce in China, suggests a recalibration away from broad de-risking strategies towards a pragmatic embrace of China’s enduring manufacturing strengths.
The findings indicate a robust commitment to the Chinese market. Nearly one-third of surveyed companies reported an increase in their China-based production activities, while an additional 37% indicated a stable supply chain strategy over the past two years. Cumulatively, 68% of respondents are either sustaining or expanding their operations in China. This contrasts sharply with the minority – only 7% – who are actively seeking to relocate manufacturing or establish alternative sourcing bases outside the country.
“We don’t see de-risking becoming a dominant theme,” stated Jens Eskelund, President of the EU Chamber of Commerce in China. “If anything, it signals that European companies continue to be increasingly reliant on China as a critical hub for sourcing and manufacturing their products.”
**Automation Drives Cost Efficiencies, Diminishing Labor Cost Advantages**
A primary catalyst for this deepening engagement is the compelling cost efficiencies realized through advanced automation. While China has long been recognized for its competitive labor costs, the landscape is rapidly evolving. Facing evolving labor dynamics, Chinese factories have aggressively embraced automation, dramatically altering the economics of production.
“The cost of labor, which may already be lower, is becoming increasingly irrelevant due to automation,” explained Denis Depoux, Senior Partner and Global Managing Director at Roland Berger, a consulting firm that contributed to the survey. “The advancement in automation levels seen over the past two years is astonishing. It’s common to see highly automated facilities with minimal human presence.”
Depoux further elaborated that while the initial investment in automation can be substantial, the long-term benefits in terms of speed and efficiency are transformative. For instance, Chinese electric vehicle manufacturer Nio, which has itself expanded into European markets, operates a facility in China powered by 941 robots. These robots can autonomously manage the production of multiple vehicle models concurrently, enabling continuous, round-the-clock operations without direct human intervention on the assembly line.
This sophisticated manufacturing ecosystem benefits from access to more affordable industrial energy and raw material costs, as highlighted in a March report by Roland Berger titled “China’s Cost and Speed Advantage: A Wake-Up Call for Western Companies.” The report also points to the influence of dynamic supplier negotiations and selective state incentives that empower Chinese products to reach global markets faster and at significantly lower price points.
The EU Chamber survey further revealed that approximately three-fourths of European companies operating in China reported their domestic production facilities as being more efficient than their counterparts elsewhere.
“In most industries today, you are contending with at least one Chinese competitor, or an international competitor leveraging Chinese supply chains,” Eskelund observed. “Therefore, to compete effectively on price and quality in many sectors, integration into Chinese supply chains becomes a strategic necessity. This is not necessarily driven by a desire to ‘onshore’ to China, but rather by the competitive realities of the global market.”
Original article, Author: Tobias. If you wish to reprint this article, please indicate the source:https://aicnbc.com/22097.html
