18.December.2018 – Asia

Europe and Asia are integrating via economic cooperation


Source: BMW annual reportsSource: Volkswagen annual reports

Integration of Eurasia is evident in trade and production movement across Eastern Europe and China. For trade, the total amount of export and imports between the EU and China in 2008 was roughly 330 billion Euro; that figure became 575 billion Euro in 2017. In the meantime, many of manufacturing production facilities and factories in Germany have moved to Eastern Europe and China because of their relatively cheap labor force, geographical proximity to emerging markets and improving transportation infrastructure. For example, Chongqing, a Chinese city with the population of 30 million, is where 1/3 of the total number of laptops in the world are produced. The city has attracted a large investment coming from overseas because of the following reasons:

  • The settlement of parts manufacturers which lowers the inbound logistics cost of laptop manufacturers (provision of 80 percent of laptop parts locally)
  • Multiple international cargo airlines that reduce the transport time by 2/3 compared with water transport and saves 90% on cost in comparison with air transport
  • Low wage yet highly educated, labor force
  • Chinese government officials efforts in luring foreign investment
  • The settlement of manufacturers (economy of scale)

Source: Bing-lian Liu, 2013, Contemporary Logistics in China: Transformation and Revitalization

In response, German automakers, such as Daimler, BMW and Volkswagen, expanded their production activities and supply chain procurements in Central and Eastern Europe to move closer to the market in China and other Asian markets. For example, Daimler’s overall vehicle production in Germany rose by only 1.2%, but production in Romania and Hungary combined grew by 14% in 2013. Such trend is also evident in other German automobile companies, such as BMW and Volkswagen that have expanded automobile production in China and Eastern Europe. In 2007, number of Volkswagen production sites in Asia was only about 15%; in 2016, it was nearly 40%. Growing economic and trade integration across the continent is likely to continue in the foreseeable future and affect geopolitical and geoeconomic relationships between European nations and China.


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