The Future of “Made in China” in Europe: Challenges and Opportunities

Europeans musing on global trade again

Europeans accustomed to free trade have again turned their minds to the subject of global trade amidst sundry crises. In this context, the notion of “Made in China”, which has been well known across the world for the past two decades, is frequently cited by European politicians and media, and people are likewise ardently discussing a question: Can Europe discontinue “Made in China”?

Europe’s de-energising and the ascension of “Made in China”

In the 1950s, Europe, having undergone two world wars, regained momentum, and European nations such as France and Germany saw the swift development of manufacturing industry. In the 1970s, neoliberalism, which emphasised free markets and global division of labour, gained popularity, and Europe straightaway directed its attention to various parts of Asia where labour and material costs were lower, and accomplished industrial advancement from manufacturing to service industries through outsourcing production abroad. Subsequently, China, which firmly applied the policy of reform and opening-up, officially entered the world trade stage at end of the 20th century. Relying on the manufacturing advantages brought by the demographic bonus and abundant resources, as well as the more favourable tariff conditions after joining the WTO in 2001, products labelled “Made in China” are sold all over the world. China’s vital position in the global value chain was thus established.

In contrast to the rapidly ascending “factory of the world” in the East, there is the deindustrialised European continent. From 1970 to the present, the proportion of French industry in GDP has dropped from 35% to less than 20%. The annual decline in the proportion of industry has brought about the EU’s increasing trade deficit with China. Even despite the impact of the epidemic, Europe’s trade deficit with China will still surge by 1/3 compared with the previous year in 2021, reaching 249 billion euros. This dependence on “Made in China” is evident from this.

Leave “Made in China”

Over the past half century, people have rarely questioned the legitimacy of free trade wherein developed and developing countries get what they desire: people in developed countries buy goods at lower prices, and developing countries seize this opportunity to accomplish economic development. However, the epidemic has made Europeans, who have long been accustomed to consuming imported goods, suddenly realise the huge drawback of globalisation- overreliance on manufacturing in other countries. After the outbreak of the Russia-Ukraine War in 2022, Europe will fall into an energy crisis, which prompts people to think deeply about the geopolitical risks underlying free trade. How to accomplish a higher degree of self-sufficiency in commodities and energy has become the hottest public topic in Europe, from governments and multinational corporations to small and medium-sized enterprises and ordinary people.

Take France as an example. In 2018, the “yellow vest” movement that swept across the country broke out. This social movement with the most extensive influence in the past 10 years has not yet ended. The fuse that pushed the “yellow vests” to the streets was the increase in fuel surcharges, but the deeper reason is the fact that the purchasing power of low- and middle-income groups in France has declined in recent years. The low- and middle-income groups in France highly overlap with the unemployed workers due to deindustrialization. They lost their job opportunities due to industrial transfer, but they also rely on social welfare and cheap energy to maintain their material lives. However, this balance is fragile, and a small increase in energy prices can make them strained. In the past two years, discussions on how to improve purchasing power have been raging in France. Before that, few people realized that the strong purchasing power of France and even the entire European and American society is actually based on the high income brought by the tertiary industry and globalisation with access to inexpensive goods.

After the epidemic and the Russo-Ukrainian War, European consumers have become more sensitive than ever to the origin of products, and “Made in Europe” has become a new marketing trend, which reflects the public’s renewed awareness of local manufacturing. But the Europeans, who are on the road to deindustrialisation, not only have labour costs several times that of the major manufacturing countries in Asia, but also rely on imports for most raw materials, which makes them have no price advantage at all. The low- and middle-income groups represented by the “yellow vests” are already feeling the huge buying pressure. Even if they intend to leave “Made in China”, they may not be able to afford the high prices.

The challenge of reindustrialization

In response to the public’s demand for local manufacturing, European companies are trying to bring the manufacturing industry back to their hometowns. The success of this reform will also affect the future of “Made in China” in Europe. Recently, a news item about the mascot of the Paris Olympic Games has dominated the headlines. The Paris Olympic Organizing Committee announced the 2024 Paris Olympic mascot “Frigi”. Because most of this cute doll will be “made in China”, it has aroused people’s confusion on the Internet: Why do we even have a small doll? Can’t achieve “Made in France”? This torture directly points to the dilemma of the current European manufacturing industry: Europe after deindustrialization not only does not have a sufficient number of industrial skilled workers, but also loses many manufacturing processes.

Taking the bicycle industry as an example, in 2021, a total of 1.4 million assembled bicycles will be produced in continental Europe, accounting for 60% of sales. However, in-depth analysis reveals that more than 60% of the components required for the 1.4 million bicycles manufactured in Europe come from China, and less than 20% are “Made in Europe”, and most of them are concentrated in metal materials and products with a high degree of automation…

“Made in China” How to Respond to the Challenge

Although Europe cannot completely leave “Made in China” in the short term, Chinese manufacturing practitioners face new challenges in the era of anti-globalization and green economy. How should China adapt to new demands? It is essential to reimagine the image of “Made in China”. Today’s “Made in China” has been gradually reborn… Is China ready to adapt to new demands and changes? History is urging us to make fateful choices.