European Companies Double Down on China Manufacturing Despite EU De-Risking Push

Why It Matters

European companies’ commitment to China preserves the continent’s price competitiveness but challenges EU policy goals to diversify supply chains and reduce geopolitical risk. The trend reshapes global manufacturing dynamics and influences investment decisions across sectors.

Key Takeaways

• 68% of surveyed EU firms plan to stay or expand in China
• Only 7% intend to shift manufacturing out of China
• Automation makes labor cost less relevant, boosting Chinese competitiveness
• Lower energy and raw‑material prices improve EU factories’ efficiency in China
• Nio’s robot‑dense plant runs 24/7 without workers on the floor

Pulse Analysis

European manufacturers are doubling down on China despite the European Union’s push to de‑risk supply chains. The latest EU Chamber of Commerce survey, based on responses from almost 300 firms, reveals that 68% of respondents either maintain or expand their Chinese operations, while a mere 7% are actively seeking alternatives. This stark contrast underscores that cost considerations—lower industrial energy, raw‑material prices, and the ability to negotiate favorable supplier terms—still outweigh strategic concerns about geopolitical exposure. Companies view China as an indispensable hub for price‑competitive production, especially when rivals leverage the same advantages.

A key driver of this persistence is the rapid adoption of automation across Chinese factories. Labor costs, traditionally a major incentive, are becoming less decisive as firms invest in robotics and AI‑driven processes. Nio’s Chinese plant, equipped with 941 autonomous robots, exemplifies how manufacturers can achieve 24/7 production without human labor on the floor, dramatically increasing throughput and reducing unit costs. Consulting firm Roland Berger notes that the level of automation observed today would have been “mind‑boggling” just two years ago, suggesting a steep learning curve that further entrenches China’s manufacturing edge.

The implications for European businesses and policymakers are profound. While staying in China safeguards short‑term competitiveness, it also deepens dependence on a market subject to regulatory shifts and geopolitical tensions. EU officials advocating supply‑chain diversification must contend with the reality that most firms see little incentive to relocate absent a clear cost advantage elsewhere. As automation continues to erode labor‑cost differentials, the strategic calculus may shift, prompting a reassessment of how Europe balances cost efficiency with resilience in its global manufacturing strategy.