European companies double down on China manufacturing despite EU de-risking push

BEIJING — Extra European companies are sustaining or increasing their provide chains in mainland China to stay aggressive globally, in accordance with a survey launched Wednesday by the European Union Chamber of Commerce in China.

Practically one-third of respondents stated they had been onshoring additional in China, whereas 37% stated they’d not modified their provide chain technique during the last two years, the report stated.

The survey was based mostly on responses from almost 300 members collected from January to February who had been conversant in their companies’ mainland China provide chain methods.

In complete, 68% of respondents stated they had been both staying or increasing operations in China. By comparability, solely 7% stated they had been transferring manufacturing unit sourcing exterior the nation or organising different manufacturing bases elsewhere, the report stated.

“We do not see form of de-risking changing into a theme,” stated Jens Eskelund, President of the EU Chamber of Commerce in China.

“If something it could point out that European companies proceed to be extra dependent on China as a sourcing and manufacturing location for his or her merchandise,” he stated.

Value is likely one of the foremost causes European companies are growing manufacturing in China, the EU Chamber survey discovered.

Comparatively low labor prices in China have helped energy its function as a worldwide manufacturing hub. However as factories face labor shortages, many have embraced automation — rapidly.

“The price of labor, which could be decrease anyway, is changing into irrelevant itself, as a result of [of] automation,” stated Denis Depoux, senior companion, world managing director at Roland Berger, a consulting agency that helped the EU Chamber assemble the survey.

“The distinction within the degree of automation [versus] two years in the past is mind-boggling. You do not see anyone anymore,” he stated, referring to his go to this week to a privately-owned Chinese language copper manufacturing firm.

Depoux added that whereas automation can initially value greater than human labor, factories can finally produce merchandise extra rapidly.

For instance, Chinese language electrical car maker Nio, which has expanded into Europe, stated one in all its factories in China operates with 941 robots that may work totally autonomously throughout a number of car fashions concurrently — with out staff on the manufacturing ground. That setup permits the manufacturing unit to function across the clock.

It is all a part of a neighborhood manufacturing ecosystem with entry to decrease industrial vitality costs and uncooked materials prices, Roland Berger identified in a March report titled “China’s value and velocity benefit: A wake-up name for Western companies.”

The report added that quarterly negotiations with suppliers on worth and selective state subsidies usually assist Chinese language merchandise attain world markets earlier and at far decrease prices.

About three-fourths of EU companies in China stated their manufacturing amenities within the nation had been extra environment friendly than operations elsewhere, the chamber’s survey discovered.

“In most industries right this moment, you have got at the least one Chinese language competitor, or a global competitor, which are leveraging Chinese language provide chains,” Eskelund stated.

“So I feel in lots of industries, if you’ll be able to compete on worth and high quality, you merely must turn into part of Chinese language provide chains,” he stated. “It is not essentially since you need to onshore on [to] China.”