European companies operating in the Chinese mainland are grappling with increased challenges, but many are simultaneously investing more in local supply chains, according to a recent survey.
The European Union Chamber of Commerce in China, in collaboration with consultancy Roland Berger, released its Business Confidence Survey 2023 on Wednesday. The survey revealed that 73% of European companies reported that operating in the Chinese mainland became more difficult this year, citing factors such as intensified market competition, complex regulations, and geopolitical uncertainties.
Despite these hurdles, 26% of the surveyed firms indicated that they have increased their investments in onshore supply chains in the Chinese mainland, marking a 5% rise compared to the previous year. This trend highlights a dual reality: while the business environment presents challenges, the Chinese mainland continues to offer unparalleled supply chain advantages.
“China’s economy is stabilizing with slower growth and greater competition, signaling transformation rather than decline,” said Denis Depoux, global managing director of Roland Berger. He added that multinational companies need to extensively localize operations, from research and development to customer service, to stay competitive.
Jens Eskelund, president of the European Union Chamber of Commerce in China, emphasized the Chinese mainland’s supply chain dominance. “The one place where companies can get better components at a lower price than anywhere else in the world is here in China,” he said.
In response to the evolving economic landscape, Chinese authorities have introduced policies to reassure foreign investors. The Private Economy Promotion Law, enacted on May 20, establishes legal safeguards for fair competition, access to financing, and support for innovation. Additionally, the State Council’s meeting on April 18 pledged stronger financial backing for the economy, with the People’s Bank of China implementing rate cuts to maintain liquidity.
As European firms navigate the complexities of operating in the Chinese mainland, many recognize the continued value of investing in local supply chains. The interplay of challenges and opportunities underscores the importance of adaptability and strategic investment in one of the world’s most dynamic markets.
