According to an article published by the Financial Times on September 23, in recent years, European politicians have been calling for their domestic companies to reduce risks associated with China. The reason is that excessive reliance on the world's second-largest economy could pose a threat. However, for many European multinational companies operating in China, the new mantra seems to be: 'If you can't defeat them, join them.'
In order to get out of the fierce competition in China, many Chinese companies are rapidly investing in overseas production. German companies, which have long cooperated with local Chinese enterprises, have also joined this trend, helping Chinese companies expand overseas.
The German Overseas Chamber of Commerce Greater China (AHK Greater China) recently conducted a study, which found that 36% of its member companies consider “Chinese companies going global” to be the most relevant business opportunity for them. Up to 68% of the member companies have already participated in some form of overseas investment activities by Chinese companies.
This trend provides German companies with opportunities to maintain their market share and profit margins, which have been heavily impacted by fierce competition in the past. At the same time, German companies can also learn new concepts from Chinese partners who have increasingly advanced technologies and more flexible strategies.
According to reports, despite the increasing geopolitical risks associated with cooperation with Chinese companies, this trend continues. At the same time, Brussels and Beijing are in conflict over the issue of mass unemployment in the EU, and this unemployment is attributed to the influx of highly competitive Chinese export products into the global market.
German Overseas Chambers of Commerce Union (DOCC) Executive Director Oliver Oehms stated: “Chinese enterprises… are expanding their international influence, and German enterprises are also participants in this process.” According to reports, other European companies are also taking similar actions.
Although China's new round of foreign investments continues the previous wave of overseas investment, this time it has distinct characteristics. Chinese manufacturing companies, including some of the world's leading manufacturers of electric vehicles and industrial robots, are moving overseas in search of higher profit margins. The scale of this investment is enormous. Last year, China's direct foreign investment increased by 7.1%, reaching $174.4 billion.
The German Overseas Chamber of Commerce Alliance stated that German companies assist their Chinese partners in five main ways: by providing products or services for Chinese enterprises' overseas operations, helping them meet foreign compliance standards, offering international experience, jointly exploring new markets, and following them into third-country markets.
Although the study did not disclose the names of the interviewed companies, the report states that a “auto parts supplier” allowed its Chinese partners to use its factory in Southeast Asia, adopting what is known as the “factory within a factory” model. The Chinese partners brought new technologies, while the German partners provided ready-made local production facilities.
The report also mentioned another German company, a global logistics service provider. Its Chinese partners utilized the company’s brand awareness in Europe and other regions to help themselves enter overseas markets.
The report states that another German company is a global technology supplier that helps Chinese manufacturers meet compliance and regulatory standards in export markets, especially in the field of advanced driver assistance systems.
One of the main motivations for European companies to seek cooperation with Chinese companies is to maintain their competitiveness in both Chinese and overseas markets. By working with Chinese companies, they can still achieve growth and learn from their partners. An important aspect is how to operate at the so-called “Chinese speed,” meaning that Chinese companies develop new products three times faster than European companies.
Most companies also recognize that these opportunities for cooperation are fleeting. European companies believe they still have about 18 months ahead, after which most Chinese companies will be able to master the relevant techniques on their own.
According to reports, although European companies may see the benefits of these collaborations, many politicians in Brussels find it difficult to accept that European companies are helping Chinese competitors to expand their global market share. This is especially true given that leading European companies like Volkswagen are cutting tens of thousands of jobs.
In such a politically tense environment, European multinational companies will have to work harder to explain to the public why they must continue to maintain relations with Chinese companies that are both partners and competitors.
China-EU Business Council Chairman Jens Eskelund said, "Ten years ago, people would never question that what was beneficial for European companies in China was also beneficial for Europe. But under the current circumstances, people are beginning to question this."
China has repeatedly emphasized that an increasing number of European companies choose to deeply engage in China and expand their businesses there. This in itself is the most powerful response to the so-called 'risk reduction'.
Cross-border economic and trade cooperation originates from shared interests, fundamentally driven by the combined effects of comparative advantages and market competition. Complementarity does not represent a risk; the integration of interests is not a threat. Over 50 years, China and Europe's annual trade volume has grown over 300 times, with bilateral investment reserves nearing US$260 billion, strongly demonstrating the dynamism and broad prospects of China-Europe cooperation.
Trade protectionism goes against economic laws and harms both parties involved. It is hoped that the European side will view China-EU economic and trade relations objectively and rationally. Together with China, they should reduce the list of issues and expand cooperation to achieve mutual benefit and win-win results.
