Steam cracker unit at BASF’s Zhanjiang Verbund location in Zhanjiang, Guangdong Province, China, on Thursday, March 26, 2026.
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BEIJING – To maintain global competitiveness, more European companies are maintaining or expanding their supply chains in mainland China, according to survey results released Wednesday by the European Union Chamber of Commerce in China.
According to the report, nearly one-third of respondents said they were further expanding their domestic footprint into China, and 37% said they had not changed their supply chain strategy in the past two years.
The survey was conducted between January and February based on responses from nearly 300 members who are familiar with their companies’ mainland China supply chain strategies.
In total, 68% of respondents said they would remain in China or expand their operations there. In contrast, only 7% of respondents said they were moving factory procurement overseas or establishing alternative manufacturing sites elsewhere.
Jens Eskelund, president of China’s EU Chamber of Commerce, said: “We don’t think it will be about some kind of risk avoidance.”
“If anything, it shows that European companies continue to become increasingly reliant on China to source and manufacture their products,” he said.
Automation reduces costs
A study by the EU Chamber of Commerce found that cost is one of the main reasons why European companies are expanding production in China.
China’s relatively low labor costs strengthen its role as a global manufacturing hub. However, as factories faced labor shortages, many quickly adopted automation.
“Because of automation, labor costs themselves, which may have been low anyway, are becoming irrelevant,” said Denis Doupou, senior partner and global managing director at consultancy Roland Berger, which helped produce the EU Chamber of Commerce study.
“The difference in the level of automation from two years ago is amazing. I don’t see anyone anymore,” he said of a private Chinese copper manufacturing company he visited this week.
Depoux added that while automation can initially cost more than labor, it ultimately allows factories to produce products more quickly.
For example, Chinese electric car manufacturers NiohThe company, which also has a presence in Europe, said one of its factories in China is powered by 941 robots that can work fully autonomously on multiple vehicle models at the same time, without having employees on the production floor. This setup allows the factory to operate 24 hours a day.
All of this is part of a local manufacturing ecosystem that can take advantage of lower industrial energy prices and raw material costs, Roland Berger said in a March report titled “China’s cost and speed advantage: A wake-up call for Western companies.”
The report added that quarterly negotiations with suppliers on prices and selective state subsidies often bring Chinese products to global markets earlier and at much lower cost.
According to the chamber’s survey, around three-quarters of EU companies in China said their domestic production facilities were more efficient than operations elsewhere.
“Most industries today have at least one Chinese competitor or an international competitor that uses Chinese supply chains,” Eskelund said.
“So I think in many industries, just being part of the Chinese supply chain is enough if you can compete on price and quality,” he said. “It’s not necessarily because we want to land in China.”
