European companies are leaning towards the Chinese market as demand for sustainable shipping grows amid global turmoil

Visitors view a new energy vehicle during the 2022 Chongqing International Automobile Exhibition in southwest China's Chongqing Municipality on June 25, 2022.

Visitors view a new energy vehicle during the 2022 Chongqing International Automobile Exhibition in southwest China’s Chongqing Municipality on June 25, 2022.

Photo: GT

Photo: GT

Companies doing transcontinental business are shifting the focus of their supply chains from Europe to China due to rising costs and energy shortages in Europe.

Due to geopolitical factors, many European companies are now transferring orders from local factories to Chinese suppliers, or simply building their own factories in China, which has held up despite global turmoil, industry experts said.

Some Chinese businessmen said orders from European customers rose 20 percent this month.

The trend is particularly evident in high-tech and energy-intensive sectors such as organic chemicals, electronic and mechanical equipment and auto parts, according to media reports, which industry experts say may boost paper of China as a global manufacturing center.

Tommy Tan, president of Shanghai EPU Supply Chain Management Co, an agent for the China-EU freight train service, confirmed the new trend to the Global Times on Tuesday. Tan has been closely involved in supply chain management for New Energy Vehicles (NEV). for the European market, providing products for European customers such as BMW and Volvo through China-Europe freight trains.

“In fact, demand from Europe is increasing. There is no official data yet, but I estimate that demand grew more than 20 percent in September year over year, mainly NEVs and lithium batteries,” Tan said.

Foreign direct investment from EU members has risen this year, despite Western media continuing to badmouth the Chinese economy and market.

A recent study by the Institut der deutschen Wirtschaft found that German investment in China amounted to €10 billion ($10.09 billion) in the first half of 2022, far exceeding the previous six-month peak since the turn of the millennium of €6.2 billion. euros, Reuters reported.

Earlier this month, German chemical group BASF launched a giant chemical project in Zhanjiang in southern China, and Merck announced in early September that China’s first OLED material production base has been completed and put into operation in Shanghai, examples of the increasing focus of major European companies shifting to the Chinese market and supply chain, experts said.

German automakers like BMW have borne the brunt of the energy crisis, raw material shortages and supply chain disruptions, largely due to the Russian-Ukrainian conflict, making the Chinese market more attractive to them, said Sun Xiaohong, general secretary of the automobile branch. of the China Chamber of Commerce for Import and Export of Machinery and Electronic Products (CCCME), told the Global Times on Tuesday.

It is not only a change in the origin of orders, but also investment and construction of new projects, a trend that reflects confidence in China, Sun said.

CCCME showed that China accounts for 76 percent of the global production of electric car batteries, while Europe accounts for just 7 percent.

“With a complete and stable industrial chain, it is safer to develop new car models in China,” Sun said.

There has been some discord in the German ruling coalition, often reminding German companies not to “rely too much” on China and seek a diversified supply chain. German companies have given Berlin the answer, Sun said.

Data from the Chinese Ministry of Commerce shows that German investment in China rose 23.5 percent year on year in the first seven months of this year.

In addition, five industries – car manufacturing, food processing, pharmaceuticals, chemicals and consumer goods – now account for nearly 70 percent of all European direct investment in China, up from 65 percent in previous years.

“There is speculation that Europe will enter an era of high energy costs, and some energy-intensive companies will need to move their operations abroad, and China’s energy supply is definitely more stable than Europe’s, and for those companies , production in China is also closer to its target market,” Cui Hongjian, director of the Department of European Studies at the China Institute of International Studies, told the Global Times on Tuesday.

Experts said that European companies will increasingly embrace the Chinese production hub and huge market, which cannot be found anywhere else.

In the last four years, the top 10 European corporate giants that have invested the most in China, such as Volkswagen and BMW, accounted for almost 80% of all European direct investment in China.

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