Xi Jinping’s new China is gradually embracing protectionism by restricting imports, limiting foreign capital and professional presence, and implementing numerous new laws, apps, and checks. These measures make it increasingly challenging for foreign companies and individuals to reside and work freely in China. While this protectionist approach may seem like a political matter, it primarily revolves around financial and expertise concerns that could potentially undermine China’s future production and innovation capabilities.
Chinese factories have traditionally excelled at manufacturing products, with any deficiencies in skills compensated for by low labour costs. However, this reliance on cheap labour is now becoming a thing of the past. These areas in which China excels were developed over the years through connections and imitation of Western products, often with the collaboration of Western engineers, designers, and skilled workers who spent time in China. For instance, companies like Huawei, ZTE, Oppo, or OnePlus might not have thrived without Foxconn’s involvement in producing Apple iPhones and iPads.
Foreign professionals were once welcomed and generously compensated, but during the COVID-19 pandemic, they faced harassment as an excuse to remove them. Now, they find themselves compelled to leave due to the unattractive autarky of the country. Meanwhile, the rest of the world beckons, and China’s international influence is diminishing, despite its eroding financial power, which has dropped from an expected 7.8% growth to a more modest 6% this year.
The new “We can do it” policy hinges on a massive domestic market and the belief that China has achieved the expertise to independently produce complex items. However, the reality is nuanced. China excels in specific markets, often influenced by government intervention, such as startups, electric vehicles, and electronic products. Yet, the idea that throwing money into these fields without the right expertise is a flawed notion.
Would you trust a Chinese-made car in a few years, knowing that the Chinese engineers who designed it have never driven a Western car? Would you buy the same car if the interior designer lacks knowledge about the market needs where it’s sold? Or would you purchase a product with security tests and production standards far from the levels required by the countries where it’s distributed? Probably not.
Apple recognised this issue long ago and shifted its production to the US, waiting for Africa to become a viable manufacturing hub in the future. Many clients now find Europe more appealing for the production of items that were once exclusively associated with Chinese factories, including electronics, plastics, metals, and prototyping. Europe offers advantages like fewer mistakes, improved communication, lower or no customs duties, and better production chain management without hidden costs.
Currently, PCB design occurs in Europe using European (often German) electronic components to ensure they are within the EU and not subject to risks like the Panama Canal issue, the Suez crisis, or US-China tensions. The plastics for designed products are manufactured in Europe at comparable prices but with higher quality. Additionally, products can proudly bear labels like “Made in Italy, Germany, France, or Spain”; for those who still care.
Major eyewear groups have already brought their production back to Italy. Luxury items like eyeglasses should not be manufactured in a country lacking product use, design expertise, or innovation in the field. Otherwise, staying at the forefront of innovation, both in design and technology, becomes challenging.
While China remains the “factory of the world,” its products are gradually becoming more Chinese in design and quality. China may never match the excellence achieved by Japan, Taiwan, Vietnam, or Turkey in their respective fields. Tesla’s impressive factory in Shanghai should not deceive observers; a Chinese supplier would have struggled to establish such a facility, and if Tesla were to leave, it could have significant repercussions.
Similarly, don’t be misled by low-cost copies of iPhones. When Apple will change the way we connect (and it will soon happen), China may continue producing phones with screens for some time but they will struggle with the “no screen” revolution.
Good luck!
