In recent years, European politicians have urged companies to reduce their reliance on China, citing risks from over-dependence on the world’s second-largest economy. However, many European multinationals operating in China are responding by forging closer partnerships with Chinese firms as they expand globally.
A study by AHK Greater China, the German Chamber of Commerce in China, found that 36 percent of its members view the international expansion of Chinese companies as a key business opportunity, and 68 percent have already engaged in some form of collaboration with Chinese firms investing overseas. The trend allows European companies, particularly German businesses with longstanding ties in China, to defend market share and protect profit margins amid intense local competition.
Chinese firms are increasingly investing abroad, driven by the search for faster returns and the need to circumvent tariffs. This wave of outbound direct investment reached $174.4 billion last year, marking a 7.1 percent increase, with many manufacturers—including advanced electric vehicle and industrial robotics producers—leading the push.
German companies are supporting their Chinese counterparts' global expansion through several means: supplying products or services to overseas operations, assisting with compliance and regulatory standards in foreign markets, sharing international business experience, jointly entering new markets, and following Chinese partners into third countries. For instance, one German automotive supplier has shared its manufacturing facilities in Southeast Asia through a “factory-in-factory” model, while Chinese partners contribute new technologies. Other firms provide logistics support or help meet export regulations, especially in areas such as advanced driver-assistance systems.
These partnerships offer European companies a way to stay competitive both in China and abroad, while also enabling them to learn from their Chinese partners’ rapid innovation cycles—often referred to as operating at “China speed,” with product development occurring up to three times faster than in Europe. However, many European companies see this window of opportunity as limited, estimating they have around 18 months before Chinese firms become fully self-sufficient in global markets.
The growing collaboration occurs amid rising geopolitical tensions between the European Union and China, as Brussels blames an influx of competitively priced Chinese exports for significant job losses across Europe. This has spurred debate among policymakers, some of whom view the partnerships with suspicion. The image of European multinationals assisting their Chinese rivals in gaining global market share has become a sensitive topic, particularly when major European companies like Volkswagen are concurrently cutting thousands of jobs.
Multinational headquarters in Europe face the challenge of convincing stakeholders and the public that continued engagement with Chinese partners remains necessary. “Ten years ago, people would never question that what is good for European companies in China is good for Europe,” said Jens Eskelund, president of the European Union Chamber of Commerce in China. “But where we are now, questions are being asked.”