r/AskEurope • u/Oueqh234 • 1d ago
Misc Why is EU manufacturing not competitive with China and when will it change?
Could you explain why they're just not competitive and is it even possible to make them competitive?
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u/tuakil 1d ago
EU pays proper wages and gives generous vacations for starters.
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u/Oddisredit 1d ago
Also China ignores safety and environmental laws. Which makes thing really cheap.
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u/oskich Sweden 1d ago
Supply chain of both raw materials and components. All those comes from China nowadays. You can find all within an hour of Shenzhen if you want to make a high tech product. And then you also have cheap energy, cheap workforce and the logistics network to back it up.
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u/ModernirsmEnjoyer Kazakhstan 1d ago
Those things don't just drop from sky. CCP moves people between business, government, research, finance, etc. so you have people in different sectors understanding what you need to have X rather than just press their own point of view.
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u/Professional_Fix4663 Slovakia 1d ago
Combined with a monetary policy that devalues the Yuan to boost exports. The Chinese central bank prints new Yuan, which they use to buy up foreign currency (mostly USD and EUR) from exporters. The central bank then uses that foreign currency to buy foreign debt and assets. This results in higher domestic prices in China and lower domestic consumption. It also makes Chinese exports cheaper.
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u/ModernirsmEnjoyer Kazakhstan 1d ago
I wonder whether CCP really wants to keep it that way, or they are keeping as long as necessary to secure next tech frontier and redirect the economy from export oriented investment to consumption
Common Prosperity was scrapped from policy but not documents, which means it could reappear later. Right now I think they are just buying time before the inevitable while using that time to go full in. That's probably going to continue for next 5 years at least.
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u/BiggusCinnamusRollus 1d ago
Do the Europeans workers find the idea working 6 days a week, un-rejectable overtimes to run tight order deadlines for half the salary, weak unions that are probably in league with the owners appealing? Are we as. a whole okay with destroying our environment more to gain a supply chain advantage (like China did with rare Earth processing)? And on top of all that heavy automation?
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u/skeletal88 1d ago
Because here people want proper wages and dont want to be slaves who work 996?
It is impossible to compete with china when their salaries are much lower and they don't care about health or environment.
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u/Mal_Dun Austria 1d ago
996 is BS anyway. we moved to 40hours 5days per week not out of the goodness of our hearts, but because companies realized it is more efficient to have a well rested work force that has time and money for spending.
We had now studies showing that probably 30hrs a day is even more efficient, as people need less breaks, make fewer mistakes and focus on performing actual work instead of looking busy.
... but more work = more output says common sense, so it has to be true ...
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u/ErebusXVII Czechia 1d ago
30 work hours a day sounds neat.
Either way, with the demografic reality of Europe, shorter working weeks are impossible and it's actually more likely we will see an increase, simply because the work will still has to be done with less workers.
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u/Mal_Dun Austria 1d ago
... or we automate even more ...
the plague brought us industrialization because Europe was forced to do more with less and now the demographic shift may do the same with AI on the rise.
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u/ErebusXVII Czechia 1d ago
Sure, AI will take over the white collar jobs and people will be doing the blue collar jobs. That's also a scenario.
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u/skeletal88 1d ago
More automation means less jobs for everyone. Now ai is doing the easy jobs in creative fields that nobody except business owners asked to be automated
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u/ErebusXVII Czechia 1d ago
No, AI is taking all jobs which consist from computer work, not just the creative ones.
And some jobs cannot be automated.
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u/CaptainPoset Germany 1d ago
we moved to 40hours 5days per week not out of the goodness of our hearts, but because companies realized it is more efficient to have a well rested work force
Not at all, it was fought for by unions in some of the largest fights the unions ever had.
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u/Mal_Dun Austria 22h ago
Both are true. Unions fought for it but companies kept it because it works just better.
Similar with universal healthcare. Most modern nations keep it because it is a net gain for society and economy. The US on contrast pays more in public spending in terms of % of GDP than most developed nations. The average American pays roughly 100.000$ more for healthcare in taxes + what they have to pay privately.
I could also go on about slavery, womens rights etc.
Most reforms turn out to be boons for the whole society rather than a loss, but people will cling to privileges out of irrational fear or short term gains just out of blind greed. It is the prisoner's dilemma all over again but on society level.
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u/CaptainPoset Germany 19h ago
Both are true. Unions fought for it but companies kept it because it works just better.
Not really, as current discussions within Germany show. It has been kept, because companies didn't want to start this fight with the unions and unions have successfully lobbied for it to become a law, instead of just a union contract.
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u/Positive-Spend-9186 1d ago
People said cost of wages already so won't say that. 1 major thing is over regulation, you can't build a industrial plant in Europe in reasonable time frame. Take for example wood cellulose textile fibers, a lot of the research was done in Europe and science figured out, but only one pilot plant has been built and in the same time china has built so much production capacity that European forest companies have withdrawn their investment plans because there is already over supply in the market before the building of first plant was even decided.
Then energy in Europe is very expensive. Especially after the Ukraine war started, many European manufacturers lost access to cheap energy and cheap resources.
EU environmental laws mean that many industrial processes required for modern high-tech manufacturing are simply illegal just because you will never get the environmental permissions to build the mines and refineries necessary.
Because all that the green technologies and renewable energy has mainly enriched china as they are able to build the technology/products that they can sell to EU while European manufacturer can't get permissions to build batteries or solar panels for decade.
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u/Captlard Born live: / 1d ago
Cost of wages and resources is simply not the same. This will change as China grows and its costs become similar to Europe's. Say in 50+ years' time
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u/hrimthurse85 1d ago
It will change when the chinese people want the same working conditions as the EU.
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u/pjc50 1d ago
I want to question the premise: apart from cars and consumer electronics, there's still competitive EU manufacturing that makes very good money. What's the Chinese equivalent of Airbus?
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u/ErebusXVII Czechia 1d ago edited 1d ago
COMAC, currently making about 60 airliners per year. Not bad for an emerging company, as it's A320/737 alternative entered service in 2023.
And I don't think you can actually disprove the OP's point by pointing out a single company, which is half of the world-wide duopoly in it's field.
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u/Available_Peanut_677 1d ago
Real answer - China controls how much their yuan costs and periodically drops prices so manufacturing in China is cheaper.
First was the UK (and Europe) like many years ago, but due to the manufacturing boom wages grew and so production costs in Europe. Quite important - pounds become more and more valuable, so goods become more and more expensive. Then USA.
Now, China recognized this issue and control it’s currency. People say supply chain - but supply chain just moves around. Before it was different parts of the world with advanced supply chains.
Work hours is not true either. First of all it is 8/5 in China officially, secondary - every over time of this is proved to have very small return (overworked people do a lot of mistakes)
And if you curious - it won’t return to Europe this century. But it is likely to move to India or Africa, since China becomes more reach anyway and production slowly becomes cheaper elsewhere
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u/weirdowerdo Sweden 1d ago
Because China is reliant on mass exploitation of labour, has a lot of natural resources that we simply dont have or refuse to mine, has an incredibly strong government directing a lot of the economy towards outcompeting most of the global market with state aid, corporate espionage and infiltration of European and American Universities. While we squabble about not competing with ourselves internally because that's unfair so now there is no support.
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u/Few_Description_6792 Poland 1d ago
Isn't China more lenient when it comes to environmental impact of manufacturing?
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u/NatureGotHands 1d ago
Is there incentive for it to change?
No supply chains, expensive energy, expensive materials, expensive labor, expensive compliance around production sites, CO2 credits and shit. For iamverysmart people planning dark factories - unions will cut off your balls.
There's no point, just manufacture in Asia like everyone else and enjoy carbon-free Riviera lifestyle at home.
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u/biffbobfred United States of America 1d ago
Europe has constraints. China doesn’t. Some of those constraints are laws, some are “worker expectations based on living situations”. On top of that, “compound interest” type growth and you get the difference.
China relative to some of its neighbors is no longer competitive. Vietnam is becoming a manufacturing hub. Some other nations.
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u/LeCockExceptionelle 1d ago
Because in China they can focus on manufacturing. Because they are not bothered by politics and elections, just to elect the biggest idiots to the positions of decision power.
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u/JimTheSaint Denmark 1d ago
Two things, China has a much lower salary and they heavily subsidize anything that is exported. They are insanely in debt because of it but they keep doing it every year because they know it is the only way they can keep people employed
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u/dbxp United Kingdom 1d ago
China focusses on massive scale and hubs of industry. For example in Shenzhen you can buy any electronics components you want 24/7 and you can go from prototype to full scale production in a month or so. There's a few places in Europe which have hubs to a degree but not to the same extent. Europe also has different countries trying to compete with the same products like Renault and VW whilst in China all the car makers cluster together so they can share production supply chains. In China if say Renault wanted to add a heated seat option they can go down the road to their chair supplier who can in turn talk to the heater supplier who is already supplying VW and have a full production run setup in a couple weeks.
If Europe wants to compete it needs to relax local production on some things and allow for hubs to emerge. Perhaps start with defence, instead of each country trying to setup local assembly for a fighter jet have it build at one or two locations and apply discounts for whichever EU nations don't get the jobs.
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u/ErebusXVII Czechia 1d ago
Europe also has different countries trying to compete with the same products like Renault and VW whilst in China all the car makers cluster together so they can share production supply chains
You don't know much about cars, do you? All european cars on the inside are Bosch, Valeo, Mahle and few other companies.
The only reason why EU's lagging behind is buerocracy. You want to make something? You have to spend months just doing the paperwork before you can go on the market. Building a factory in EU takes years and by the time you can finally start producing, the market already shifted. China's industry is able to react instantly.
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u/dbxp United Kingdom 1d ago
A quick google says BMW has 8 sites in Germany, Mercedes another 8. In China those would all be clustered in a single region along with the full supply chain.
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u/ErebusXVII Czechia 1d ago
The distance between warehouses isn't as important as you think. And it definitely isn't the defining factor in industry's competitiveness.
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u/MeltingChocolateAhh United Kingdom 1d ago
Vehicle components already all resemble a few makes.
Stellantis - Peugeot, Fiat, Maserati, Jeep, Alfa Romeo, Vauxhall
VW - Skoda, Seat, Porsche, Audi, Bentley, Lamborghini
Renault, Nissan, Mitsubishi all partnered. Not sure if this is for manufacturing or shares. Don't really care enough to find out either.
All of those above do still have the same few parts for each make/model. Not much is bespoke about any of them. There are quality issues per make because they are still independently produced so QC is handled separately which is one reason why JLR is falling. But they're definitely streamlining production by falling under the same manufacturers.
Then you get Tesla which is American and its own thing. BYD is Chinese and also its own thing which counters what you're saying.
A better angle to take at OP would have been that the EU is still a number of independent countries who contribute to a single union. China is a country in its own right without silly little things like fair wages, employment rights, the environment, and health & safety regulations getting in the way of production.
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u/No_Chocolate9486 Transilvania 1d ago
Europe never was and probably never will be a manufacturing powerhouse like China. We don't have the infrastructure and know-how that China has. On top of that, labor is more expensive, we have more regulations, and raw materials, electricity, and gas cost more.
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u/Alternative-Mango-52 Hungary 1d ago
Because our costs are high as fuck. To make something, you have to pay a wage to people that's even if tightly, but covers the costs of everyday life in europe. Scratch that, you have to pay twice that, but government takes roughly half from either you or your employee. Most people here desire a white collar job too, and pursue higher education, which is available to them comparatively easily and cheaply. We also have to import most of our raw materials, because we used up Europe's already not that large reserves mostly. China, on top of stealing intellectual property for a long time and on a large scale, because "what you're going to do about it? Cry?" Has a large population used to not that great welfare, willing to work in manufacturing for lower wages, and the overall tax burden on that is lower than our own. They also have basically everything at home from mining to research. All that is supercharged with foreign investment, because even for ourselves, it made sense to outsource production to them.
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u/Seankps4 1d ago
China has spent decades building a self sustaining industrial powerhouse. EU were happy to ship off manufacturering to China many years ago and are now realizing that they've relinquished industrial control. Everything is made in China so now everything is accessible in China, energy, manufacturering eco systems, labour, logistics, technology, experience, state support and appetite are all prevalent in China and while the EU have been complacent.
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u/korpisoturi Finland 1d ago
As everyone said, resources and wages but china has grown massive industrial ecosystem that feeds itself by becoming more efficient and bigger all the time.
To manufacture complicated stuff we would need to start multiple different manufacturing from scratch when China has all of them centralized next to each other ready to go and gaining headstart everyday
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u/EfficientActivity Norway 1d ago
Because the Chinese currency is not convertible, and will not rise in value to rebalance trade. Europe will continue to lose until there is no competitive production left, unless it "brains up" and starts to protect itself.
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u/N1LEredd Germany 1d ago
Question one: Work conditions.
Question two: never.
Thanks for coming to my ted talk.
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u/CaptainPoset Germany 1d ago
China has no business tax, wages are on (south) eastern European levels, environmental protection regulation is lackluster and not enforced unless you are considered an enemy of the CCP, workers' rights are poor and endorced as much as environmental protection regulations, the social welfare system exists only marginally, China has a monopoly on quite a few resources, which they only sell at huge premiums to foreigners, the GDP rise of China was in no small part due to infrastructure projects of dubious benefit, which now is spare capacity. Energy in China is cheap, too, while it is the most expensive on earth in the EU.
In addition to that, China has a state policy of establishing a Chinese monopoly by unfair business practices one industry at a time: They heavily subsidise an industry, so that it sells their product below cost of manufacture and includes shipping in this price, so that foreign competitors go bankrupt and once this happens, China stops the subsidies (raises prices) and goes to the next industry.
They did so with steel, with raw minerals refinement, with consumer electronics and now do so with cars. Every Chinese car sold outside China is sold at a loss, but the manufacturer gets it reimbursed as a state subsidy.
This will change as soon as the EU acknowledges this to its full extent and tariffs the subsidies out of the Chinese products again or bans the Chinese-made imports outright.
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u/Traditional-Deal6759 Austria 1d ago
Beginning in the 1990s, China's government started subsidizing the factories so that they can undercut world market prices. Non-chinese manufacturing companies lost customers. They had three options: close, move to a niche, or move production to China, where they could only own a max-50%. joint venture.
After the first round of this, the Chinese government started to subsidize also the niche manufacturers, so they could either close or move production to a Chinese joint venture.
While this was happening, the managers of those companies got big bonuses for cutting the cost and diversifying the production.
This brought us to the situation we are in now, where companies, controlled either by the Chinese government or the communist party of China, have monopolies over whole sectors and can dictate the prices.
When will this change? When we start to copy this process and reverse it.
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u/MeltingChocolateAhh United Kingdom 1d ago
China is its own country with its own diplomacy. The EU are multiple countries with multiple sets of regulations, sure they're all fairy similar as they align to whatever the EU says they should, but it just won't work.
On top of this, as a union, the EU has only recently came about while China has been many years longer and had already cemented itself. And, the EU places a lot of emphasis on health and safety and the environment by regulating them. The workers rights are much stronger in the EU too. "Live to work, or work to live?"
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u/Nooms88 United Kingdom 1d ago
Resources and wages are much cheaper in China, also absolutely massive government subsidies exist in China, dwarfing even the USA