European Firms in China Increase Local Production as They Adapt Supply Chains to Middle East Disruptions

More than a quarter of surveyed European companies operating in China had adjusted their supply chain strategies in China following the Middle East conflict, the EU Chamber of Commerce in China said in a flash survey published on 13 May 2026. Supply disruptions and rising costs linked to Middle East instability are forcing companies to adjust sourcing, production and investment plans.

Some European companies operating in China are shifting more production to the country.

It found higher energy and logistics costs are weighing on operations of European companies in China. Two-thirds of surveyed European firms in China reported longer delivery times and high transport costs, while about 66 per cent faced higher energy costs.

Eighty-one per cent of surveyed European firms in China were struggling to source Middle Eastern inputs. Nearly a quarter of surveyed respondents warned that production stoppages were possible within three to six months if the conflict persisted. More than three in 10 surveyed respondents negatively affected by the conflict reported lower demand.

The automotive sector has been hit particularly hard, with 62 per cent of surveyed European companies operating in China in the automotive sector reporting a decline in demand. Six in 10 chemicals and petroleum firms surveyed had made supply chain changes. Of those chemicals and petroleum firms that made changes, 35 per cent further onshored production to China.

In the machinery sector, 14 per cent of machinery sector firms making supply chain adjustments were looking to increase local production capacity in China. The flash survey was released almost three months after the United States and Israel launched air strikes against Iran. Energy supplies remain disrupted in the Strait of Hormuz as of 13 May 2026.

On 13 May 2026, US President Donald Trump told reporters that Washington and Tehran were “either going to make a deal or they’re going to be decimated”. The EU Chamber of Commerce in China survey illustrates how the conflict that began with those strikes continues to ripple through global business operations in China.

South China Morning Post reported the details of the survey and the ongoing disruptions.