Europe Accelerates Its Industrial Expansion Inside China in Search of Lower Costs and Greater Competitiveness European Companies Strengthen Their Manufacturing Presence in China Despite “Decoupling” Rhetoric

NYN | Reports and Analyses 

The Financial Times has revealed that European manufacturers are expanding their production investments in China at an accelerating pace, despite Western concerns over excessive dependence on the world’s second-largest economy.

The paper confirmed that China’s structural advantages—foremost among them low costs and highly efficient supply chains—present European companies with a difficult equation that makes competing outside the Chinese market far less viable.

Lower Costs and More Efficient Supply Chains Drive Expansion in the Chinese Market

According to the report, European companies view China’s manufacturing environment as the one most capable of granting them a decisive competitive edge, not only because of low production costs but also due to Chinese government procurement rules that favor domestic manufacturers.

The report adds that these policies push foreign companies to invest inside China to secure access to its vast market.

The Financial Times quoted Conrad Keijzer, CEO of Swiss chemicals company Clariant, as saying that his firm is investing 180 million Swiss francs (USD 226 million) to expand its plant in the Daya Bay area, which also hosts major investments by Germany’s BASF and Royal Dutch Shell.

Dependence on China Is Not Decreasing… It Is Increasing Globally

Jens Eskelund, President of the European Chamber of Commerce in China, said that the overall trend points to growing dependence on China by global—not only European—companies. He explained that companies seeking to maintain competitiveness in global supply chains “will naturally gravitate to the place that offers the lowest-cost components,” which China clearly provides.

Record Manufacturing Investment Inside China Since 2021

The report cited data from the Rhodium Group in Washington, confirming the continued flow of European foreign direct investment into China’s manufacturing sector since 2021, reaching a record 3.6 billion euros in the second quarter of last year.

According to the paper, what worries Europe is Western companies’ use of China as a global export platform. Falling producer prices and a 20% depreciation of the yuan against the euro since mid-2022 have made China a far cheaper production base than Europe—especially after Europe’s energy costs surged due to the war in Ukraine.

Job Cuts in Europe, Industrial Expansion in China

The Financial Times explained that this wave of Chinese-based expansion coincides with major layoffs in Europe, especially in the automotive sector.

German company ZF announced it would cut 7,600 jobs in Europe by 2030—less than a year after announcing its expansion in Shenyang, China.

Meanwhile, spare-parts manufacturer Schaeffler revealed plans to double its business in China within seven years, even as it closed some European operations and cut around 4,700 jobs.

The paper notes similar expansions announced by major European companies, including France’s Schneider Electric, Denmark’s Danfoss (vehicle drivetrains), wind-turbine maker Vestas, and global pharmaceutical giants Roche and AstraZeneca.

Deeper Research and Development in China… Not Just Relocating Factories

Europe’s shift is not limited to relocating production capacities. It also extends to expanding research and development activities inside China.

The report points out that Western companies increasingly see China as an integrated technological and scientific hub—not merely a low-cost production platform.

European Experts: The Problem Lies Within Europe, Not China

The Financial Times quoted Jörg Wuttke, partner at the consultancy DGA and former president of the European Chamber of Commerce in China, as saying that Europe bears a major part of the responsibility for its declining competitiveness.

He added that the continent needs, above all, “a deep internal overhaul” that includes liberalizing markets, lowering energy prices, enhancing competitiveness, and improving engineering education, stressing: “We cannot blame China.”