Chinese Manufacturers Accelerate Global Expansion Amid Domestic Pressures

Chinese manufacturers are expanding overseas to counter weak domestic demand, rising competition, and shifting supply chains. Firms are opening factories in Southeast Asia and emerging markets to secure new revenue and stay close to relocated clients. Despite regulatory hurdles, geopolitical risks, and high operating costs abroad, global expansion is increasingly essential for maintaining competitiveness and long‑term stability.

China’s long‑standing role as a global production powerhouse is evolving as more of its manufacturers shift operations beyond national borders. Faced with soft domestic demand, heightened competition, and geopolitical uncertainty, an increasing number of firms are building factories overseas to secure new revenue streams and stay connected to customers who have already relocated production.

A chemical producer from Guangdong illustrates this shift. After years of relying on strong demand at home, the company experienced a slowdown that coincided with its clients moving operations to Southeast Asia. To remain part of its customers’ supply chains, the firm opened a new facility near Ho Chi Minh City, with full completion expected next year.

Even before the plant officially launched, orders began arriving from long‑standing clients who had also relocated to Vietnam.

Industry consultants note that deflationary pressures in China have become a major catalyst for manufacturers seeking overseas income. Many believe that stable performance will increasingly depend on earning a significant share of revenue outside the domestic market, given sluggish consumer prices and years of contraction in producer prices.

Geopolitical unpredictability, including tariff-related tensions initiated by the United States, has also contributed to firms diversifying their production bases. However, business owners and analysts emphasize that the primary drivers are economic—namely the pursuit of new markets and alignment with global supply chain shifts.

Southeast Asia has emerged as one of the most popular destinations. China’s outward foreign direct investment rose to more than US$190 billion in 2024, with manufacturing accounting for a growing portion. Investments in ASEAN nations saw particularly strong growth, flowing largely into electronics and equipment production. Companies cite the region’s stability, maturing supply chains and proximity to China as key advantages.

Local regulatory environments, however, are evolving quickly. In Vietnam, for example, authorities plan to clamp down on unlicensed factories by 2029—posing challenges for some investors but creating opportunities for compliant entrants.

Beyond Asia, firms are targeting emerging markets in South America and Africa where demand for electric vehicles and other new technologies is expanding rapidly. Some companies prefer partnering with local dealers through joint ventures to minimize cost and risk while contributing technical expertise.

Despite strong outbound momentum, Chinese manufacturers still face an increasingly complex global landscape. Recent disputes—such as a high‑profile clash between China and the Netherlands over a chipmaker—highlight how national security concerns and protectionist policies can disrupt carefully built supply chains.

Policy changes in other regions add uncertainty. The European Union’s upcoming bans on certain vehicle types and its battery localisation rules pose cost challenges for companies considering production there. High labour and operational costs have already led some Chinese firms to reconsider or decline major overseas projects.

Even once factories are established, daily operations can be difficult. Executives with experience across multiple countries note that fluctuating policies, labour availability, and geopolitical tensions require companies to allocate orders strategically to maintain profitability.

Consultants working with Chinese enterprises observe that many firms entering foreign markets still attempt to use domestic management models, often underestimating cultural, regulatory, and operational differences. As manufacturers transition from producing “Made in China” goods to running globally integrated operations, expertise in risk management, standardisation, and cross‑cultural communication has become essential.

These challenges came into sharp relief during the construction of a major automotive factory in Brazil, where allegations of labour abuse temporarily halted the project. Analysts say such incidents underscore the importance of understanding local laws and labour expectations as companies continue to expand abroad.

Despite the risks, the broader trend shows no signs of slowing. For many Chinese manufacturers, establishing a global footprint is no longer a strategic option—it has become a requirement for survival in a rapidly shifting economic environment.