Manufacturers need to face up to new wave of Chinese competition

Pace of post-pandemic development a wake-up call for Western companies.

- Thomas Hale

In March, as a visiting delegation of Swedish investors and bankers passed through China's factories and shipyards for the first time since the Covid-19 pandemic, what they witnessed was a shock to their systems.

Across the mainland, where Sweden's manufacturers have a longstanding presence, competition from Chinese firms was "ferocious", even "monstrous", according to Mr Mattias Sundling, chief equity strategist at Handelsbanken.

"The way they have caught up and developed in just two or three years was just stunning to us," he said.

"The cliched image of Chinese competition was one of cheap copies. I think the wake-up call for us when we were on this trip is that this is no longer the case." From high school examinations to bubble tea franchises, intense domestic competition is pervasive across China. Now, as embodied in expanding electric vehicle (EV) production, that sense of competition poses a growing challenge to international businesses.

Autos are just one part of a wider industrial framework within which, for decades, developed economies have relied on China as an inexpensive and collaborative manufacturing hub.

The Swedish presence includes giants such as Atlas Copco, the world's leading provider of air compressors, and Sandvik, which makes mining equipment.