From Market Opportunity to Global Competition: What Is Changing for European Companies in China?

European companies continue to generate substantial profits in China. European enterprises were estimated to earn approximately €30 billion in profits in China in 2024, with around €12 billion repatriated to the EU as dividends (Martin, 2025).

Yet the operating environment is becoming increasingly challenging.

According to the European Business in China Business Confidence Survey 2026, conducted by the European Union Chamber of Commerce in China among 549 European companies, 68% of respondents said that doing business in China had become more difficult over the previous year. Although this was still a high proportion, it represented a five-percentage-point improvement from the previous year and the first decline in this measure in five years.

More strikingly, 48% of respondents said that Chinese companies in their sectors had surpassed their European counterparts in innovation capability.

These figures raise a more fundamental question than whether foreign companies are finding China "difficult".

At the time, China was seeking to accelerate the development of its high-speed rail capabilities. The procurement model involved international companies supplying technology and equipment while working with Chinese manufacturers to support local production and technology transfer.

For example, Kawasaki's 2004 agreement with China's Nanche Sifang involved the transfer of production technology, with the majority of the trains to be manufactured in China (Kawasaki Corporation, 2004). Alstom also announced technology transfer arrangements that enabled 51 of the 60 trains in its contract to be built locally (Alstom, 2004).

More than two decades later, China's high-speed rail industry has developed into one of the world's largest and most technologically advanced rail systems.

The significance of this story goes beyond high-speed rail itself.

It illustrates how competitive advantages can evolve over time.

Technology that was once primarily introduced by international companies can be absorbed, adapted and further developed within the local market. As domestic capabilities strengthen, international companies increasingly compete not simply with other international companies, but with highly capable local players.

Has the competitive dynamic in China fundamentally changed?

For many years, China's market offered international companies significant opportunities to introduce technologies, products and business models, while benefiting from the country's rapid economic growth.

Today, the competitive environment is different.

Chinese companies are increasingly competing directly with international companies not only on price and manufacturing efficiency, but also on innovation, speed of development, digital capabilities and responsiveness to local customers.

China's high-speed rail industry provides an interesting example of how this dynamic can evolve.

From technology introduction to technological competition

In 2004, China's Ministry of Railways launched a major procurement programme for high-speed trains capable of operating at speeds of around 200 km/h. International manufacturers including Siemens, Alstom, Kawasaki and Bombardier competed for contracts in the rapidly developing Chinese market.

The question for international companies

The 2026 European Chamber survey does not suggest that European companies are simply leaving China. In fact, the majority continue to operate in the market, while many are adapting their strategies to a more competitive and complex environment. The Chamber itself highlights the need for companies to build resilience and agility while making use of China's innovation, cost and speed advantages.

Perhaps, therefore, the more important question is not:

"Is China becoming more difficult for foreign companies?"

but:

"How has the basis of competition in China changed—and what does that mean for international companies operating there today?"

I'd be interested to hear your perspective.

How do you think the competitive dynamics between international and Chinese companies have evolved over the past two decades?

Reference:

Alstom (2004) Alstom awarded business worth one billion euros by Chinese railways, Alstom official website news.

Kawasaki Corporation (2004) Kawasaki wins high-speed train order for China, Kawasaki heavy industries, Ltd. official website news

Martin, S. (2025) Contribution of European firms’ investments in China to European economies, Central European Institute of Asian Studies

The European Union Chamber of Commerce in China (European Chamber) (2026) European business in China business confidence survey 2026 (BCS)

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