^{Photo: South China Morning Post}

As governments across Europe push companies to reduce strategic dependence on China, many businesses appear to be moving in the opposite direction. Rather than scaling back operations, a growing number of European firms are strengthening manufacturing ties with the world's second-largest economy in an effort to stay globally competitive.

The latest industry findings suggest that practical business realities such as production costs, speed, automation capabilities, and supply chain efficiency are proving stronger than political pressure to diversify manufacturing networks.

While policymakers continue promoting "de-risking" strategies, corporate decisions increasingly indicate that China remains difficult to replace within the global manufacturing ecosystem.

European Businesses Continue Expanding Operations in China

New survey data from European business groups operating in mainland China shows that most companies are either maintaining their existing manufacturing footprint or expanding further.

According to responses collected from nearly 300 businesses familiar with their company's supply chain strategy:

• Around 31% said they were increasing onshore activity within China
• Approximately 37% reported no major changes to their strategy over the past two years
• Combined, nearly 68% said they were maintaining or expanding Chinese operations
• Only about 7% said they were actively moving sourcing activities outside China or building alternative manufacturing hubs elsewhere

The figures reveal a major gap between political narratives and real-world business behavior.

Despite growing discussions around supply chain resilience and geopolitical risk management, most companies are still choosing China as a core production base.

Why De-Risking Has Become More Difficult Than Expected

Over the past several years, governments and policymakers across Europe and North America have increasingly promoted de-risking strategies designed to reduce excessive dependence on Chinese manufacturing.

The objective is not complete economic separation but rather creating alternative supply chains that can reduce vulnerability during periods of geopolitical tension or trade disruption.

However, many companies are finding that shifting operations away from China is easier in theory than in practice.

China currently accounts for approximately 28% of global manufacturing output, making it the largest manufacturing economy in the world.

That dominance creates an extensive ecosystem involving:

• Raw material suppliers
• Component manufacturers
• Logistics providers
• specialized engineering networks
• Industrial technology systems
• Skilled labor resources

Recreating these advantages elsewhere often requires years of investment and substantial costs.

For many firms, leaving China entirely would mean sacrificing efficiency and competitiveness.

Companies Are Building a "China Plus One" Strategy

Rather than abandoning China, many businesses appear to be adopting a more balanced approach.

Approximately one-quarter of surveyed firms reported using a strategy often referred to as "China Plus One."

Under this model, companies continue expanding operations inside China while simultaneously creating secondary manufacturing capabilities elsewhere.

This approach allows businesses to:

• Maintain access to China's manufacturing ecosystem
• Reduce potential geopolitical risk
• Improve supply chain resilience
• Diversify sourcing channels
• Avoid relying entirely on a single country

Instead of replacing China, businesses are increasingly treating it as a core pillar alongside alternative markets.

Chinese Companies Are Taking Greater Control of Global Supply Chains

The supply chain landscape is also evolving in another important way.

Chinese businesses are increasingly becoming international operators themselves rather than simply manufacturing products for foreign companies.

As Chinese firms expand overseas, many are taking direct ownership of supply chain management processes.

Industries showing this trend include:

• Electric vehicles
• Battery production
• Consumer electronics
• Renewable energy equipment
• Industrial technology manufacturing

This shift means decisions involving production, logistics, shipping, payments, and procurement are increasingly being managed directly from China.

As Chinese multinational businesses mature, their influence over global supply chain networks continues expanding.

Automation Is Redefining Manufacturing Economics

One of the strongest factors helping China maintain its manufacturing advantage is automation.

Historically, lower labor costs were considered one of the country's biggest strengths.

That equation is now changing.

Manufacturers are increasingly deploying highly automated facilities that rely less on human labor and more on robotics, artificial intelligence systems, and advanced industrial technology.

Executives and manufacturing experts report a dramatic transformation occurring inside Chinese factories over the past several years.

Modern facilities now operate with:

• Fully integrated robotics systems
• AI-driven production monitoring
• Automated quality control processes
• Smart manufacturing technology
• Continuous 24-hour production capability

As automation expands, labor cost differences become less important because productivity gains increasingly drive competitiveness.

China's EV Industry Shows the Scale of Change

China's electric vehicle industry offers one of the clearest examples of this manufacturing transformation.

Large production facilities are now capable of operating with hundreds of autonomous robots working simultaneously across multiple vehicle models.

Some advanced plants run around the clock with minimal direct human involvement on factory floors.

This creates several advantages:

• Faster production cycles
• Lower long-term operational costs
• Improved quality consistency
• Greater manufacturing flexibility
• Faster product delivery to global markets

For industries competing in highly dynamic sectors, speed increasingly matters as much as cost.

Companies that can move products from concept to market faster often gain a significant competitive edge.

The Broader Manufacturing Ecosystem Creates Additional Advantages

China's manufacturing strength extends beyond individual factories.

Businesses also benefit from broader structural advantages, including:

• Lower industrial energy costs
• Extensive raw material access
• Large supplier networks
• Dense transportation infrastructure
• Rapid procurement systems
• Strong domestic manufacturing clusters

Manufacturers often negotiate pricing frequently with suppliers and can rapidly adjust production requirements.

These advantages help reduce costs and shorten delivery timelines.

For many businesses, the result is a production environment that remains difficult to match elsewhere.

Efficiency Is Becoming the Deciding Factor

Survey findings suggest that efficiency may now be one of the biggest reasons businesses remain committed to China.

Roughly three-fourths of surveyed companies indicated that their Chinese operations outperform facilities located in other regions.

This does not necessarily mean companies prefer China from a geopolitical perspective.

Rather, businesses increasingly view Chinese manufacturing as an operational necessity.

In many industries, competing globally on price, quality, and speed increasingly requires some level of integration with Chinese supply networks.

Global Manufacturing Is Entering a New Phase

The latest trends suggest that global supply chains are not moving toward a simple "China versus the rest of the world" model.

Instead, businesses are building more complex structures where diversification and continued Chinese integration coexist.

Governments may continue pursuing de-risking policies, but market realities are creating a different outcome.

For many European firms, maintaining competitiveness in global markets increasingly means strengthening efficiency rather than reducing exposure.

And for now, China remains at the center of that equation.