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China now key part of MNCs' operations

China has become a crucial part of the global operations of many European multinational companies, with a majority of them reporting higher gross margins last year in the country than in other parts of the world, a new survey said on Tuesday.

Conducted by the European Union Chamber of Commerce in China, the European Business in China Business Confidence Survey 2021 contained responses from 585 members on various aspects like 2020 performance, as well as future outlook.

Nearly a third of all the European manufacturers said they would onshore their supply chains to China, five times the number that are offshoring. About 27 percent of the respondents who are part of a joint venture in China, confirmed their intent to increase their positions, with 18 percent keen on acquiring a controlling stake, while 2 percent preferred to buy out their partner completely to form a fully foreign-owned enterprise, said the survey.

The study said foreign enterprises are not only chasing the growth potential of China's economic recovery, but also thinking on how to stay invested and build scale in the critical market for the long-term. Looking ahead, about 68 percent of European companies in China are optimistic about growth, a 20-percentage-point increase on a yearly basis.

European firms are now more confident about their prospects as steady COVID-19 vaccine rollouts around the world will spur global demand and even stronger growth in China, it said.

"European companies both contributed to and benefited from China's strong and speedy economic recovery," said Denis Depoux, global managing director of Munich-headquartered consultancy firm Roland Berger.

"They are ready to deepen their positions here, and have a wealth of technology and expertise to drive not only growth, but also help with China's decarbonization goals and its industrial upgrade," he said.

Last February, a joint survey of members of the European and German chambers of commerce in China had indicated that nearly 50 percent of the respondents were anticipating a year-on-year decrease in revenue, with only 0.5 percent expecting any increase. Companies spoke extensively of making their global supply chains resilient and diversifying into other markets.


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