Firms to opt for China ahead of Eastern Europe

CHINA/EU: Companies will opt for China ahead of eastern Europe when considering future manufacturing investment, according to a new study.

The Deloitte global manufacturing benchmark study was published as Chinese Prime Minister Mr Wen Jiabao visits Ireland to strengthen business relationships between the two states.

It indicates that it is China rather than the new EU accession states of eastern Europe that presents the major challenge to Ireland for manufacturing jobs, a finding that is "against the general expectation in Ireland", Deloitte consulting partner Mr David Hearn says.

The study shows that while 27 per cent of western European firms envisage building factories in eastern Europe in the next three years, 31 per cent see China as the most likely location for new plants. The figures are more dramatic for North American firms, 37 per cent of whom have said they will choose China for medium-term expansion compared to just 11 per cent for eastern Europe and 26 per cent for western Europe, including Ireland.

Indigenous Chinese suppliers are also likely to take a larger slice of the market for components or materials. China is already a major supplier to North American firms but the gap with Europe is growing.

In the next three years, 58 per cent of firms expect to source more of their supplies in China against just 12 per cent for western Europe and 18 per cent in eastern Europe.

Europe's economic heartland will follow a similar pattern, with China accounting for 41 per cent of the growth in outsourced supplies, slightly ahead of the 36 per cent likely to come form eastern Europe.

On the positive side, China offers a market of 1.3 billion consumers for Irish businesses.