The Economist reports that Chinese companies are building factories all over the world. From Saudi Arabia and Hungary to Brazil and Indonesia, Chinese industrial parks, ports and airports are springing up like mushrooms after rain. China is expanding its supply chains around the world, and a reshaping of the global manufacturing and business landscape is underway.
In the past three years alone, Chinese companies have spent more than US$200 billion building factories overseas, and their supply chains have also undergone qualitative changes. First, they are more widely distributed, with large production sites in almost every region of the world. Secondly, as the domestic tight manufacturing ecosystem is replicated in new overseas locations, the supply chain becomes deeper. Third, it is increasingly dominated by strategic industries, ranging from electric vehicles and clean energy to data center equipment.
Reasons that prompted Chinese companies to take the move include weak domestic consumer spending, fierce competition, and Trump's high tariffs on China. Preferential policies in some countries are also incentives. For example, Egypt provides a "golden license" for large-scale projects that greatly reduces the review process. Mohamed Eldib, a lawyer who helps Chinese companies set up factories, said they are eager to "come in and make money" by selling products to Egypt's 120 million people and using Egypt as an export base.
The result is that production sites are increasingly dispersed. JA Solar, JinkoSolar and Trina Solar produced solar panels in some Southeast Asian countries 10 years ago and are now building factories in Persian Gulf countries. New production centers in China are also gradually integrated into customers' supply chains. German wind turbine manufacturer Nordex now sources blades from a Chinese supplier at a factory it established in Morocco last year.
Europe has also become a popular area for Chinese companies to expand. Rhodium data shows that in the first half of last year, Chinese companies’ new “greenfield” direct investments in Europe reached a record 8.9 billion euros. Among them, Hungary and Serbia receive the most attention.
China's global supply chains tend to deepen. More and more upstream manufacturers are also moving overseas. Guoxuan Hi-Tech, a major Chinese battery manufacturer, is building a super factory in an industrial zone 70 kilometers northeast of Rabat, the capital of Morocco. BTR, which produces cathode and anode materials, and Hailiang Group, which produces copper foil, are also building factories nearby.
Meanwhile, China's logistics companies are helping its manufacturers connect their newly vast supply chains. These companies currently operate or have invested in at least 132 ports around the world, from Greece to Sri Lanka, as well as airports and railways. Among them, the railway from Budapest to Belgrade was completed this year.
The overseas investment boom of Chinese companies is mainly concentrated in a few strategic industries. For example, several large-scale solar power plants in the Egyptian desert rely on Chinese equipment, more and more of which are produced locally. Chinese electric cars, seen everywhere from Rio de Janeiro to London, are also increasingly produced in regional centers closer to customers.
Artificial intelligence data centers are also another focus. Thailand has emerged as a manufacturer of high-speed optical components in China, such as the production center of Zhongji InnoLight, whose products are used by American cloud computing giants.
