5x More EU Companies to Expand in China Than Not

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The European Union Chamber of Commerce in China published a new survey titled “European Business in China Business Confidence Survey 2021,” which stated European businesses are onshoring some of their supply chains and investing more in China. Out of the 585 European Chamber member companies operating in China, about 60% were expected to expand operations in the country, up from 51% last year. Half of the respondents reported profit margins in China were higher than their global average, increasing from 38% a year prior.

“As 2020 progressed, the resilience of China’s market provided much-needed shelter for European companies amidst the storm of the COVID-19 pandemic. Revenue trended only slightly downward, with 75% of respondents either maintaining or increasing revenue y-o-y, and profitability remained steady. On that foundation, optimism about near-term growth in China surged by 20 percentage points, and the number of European companies either expanding or looking to expand their business in China has increased,” the chamber said.

A quarter of respondents are onshoring some of their supply chains to China, with 4% attempting to entirely onshore. About 10% are diversifying future investment into other countries but will leave operations in China untouched. Only 4% are shifting investments out of China, with 1% fully divesting. “In other words, five times as many companies are onshoring as there is offshoring,” the chamber said.

Perhaps the European business community has concluded that it doesn’t have the industrial strength to compete with the Chinese economic powerhouse. This is terrible news for President Joe Biden, who continues to follow down the path of former President Trump’s decoupling movement of the US and Western allies against rising China.

But unlike the Cold War of the last century, this confrontation will be significantly intertwined with economics.

While the US attempts to decouple from China, its allies, mainly in Europe, are bowing down to China and have decided to join as they can’t compete. This will complicate Biden’s vision of the US and its Western allies in leading the world economically and militarily in the 21st century.

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