The Flanders-China Chamber of Commerce organized an exclusive webinar focused on Setting Up Your Own Manufacturing Facility in China on 17 June 2025.
Ms Gwenn Sonck, Executive Director of of the Flanders China Chamber of Commerce (FCCC) and the EU-China Business Association (EUCBA), welcomed the participants to the webinar and introduced the speakers. The EU and China are interdependent and need each other. In 2024, the Chinese investment in the EU also matched the same amount of EU investment in China. In 2024, Chinese direct investment in the EU reached €185 billion, while European investment in China held steady at €184 billion. In Q1 of this year, EU FDI into China maintained its momentum with investments totaling €3,06 billion, the strongest first quarter performance since 2022.
Mrs. Ting Zhang, CEO and Founder of Crayfish introduced her company, formally called Crayfish.io Limited because it started with a digital platform in 2017 when it was launched, but now the company has expanded to include advisory consulting as well as IP monetization and IP commercialization business. Crayfish has been working with various companies in the Flanders region as well as other European countries. Turning to China's manufacturing, Ms. Zhang said that there is no doubt that China is the world's powerhouse. It has actually been 15 conservative years that China's industrial output is at the top of the world at about €4 trillion. VR equipment, electric vehicles (EVs) as well as EV charging equipment show the highest growth. China has not always had this manufacturing advantage in the last century, although China had the well-known four great inventions: the compass, gunpowder, paper making and printing. But unfortunately, China lost its advantage in terms of manufacturing when the Industrial Revolution started in Britain. China had a very backward century in terms of manufacturing, but in the last four decades, however, China has managed to catch up really quickly and now it has not just caught up with the West, but in fact, in many other areas has exceeded Western countries in terms of scale and capacity. This didn't happen by coincidence. It was a part of the government's long term drive to boost China's manufacturing, but also specifically, there is this Made in China 2025 initiative, which was launched in China by the government under Xi Jinping's leadership in 2015.
In 2023, the Chinese government pursued new policies and strategies, particularly to diversify China's manufacturing from the sort of old traditional toys and clothes to smart, high end, and green manufacturing, which are called the new productive forces. It is basically aiming for China to go through a new economic model based on innovation, particularly in advanced sectors, so that China would lead the development of strategic emerging and future industries. This includes the use of AI, IoT, robotics as well as brain technology. Everywhere, China is advocating green factories. The number of national-level green factories has reached 6,430 accounting for about 20% of the total output value. The Chinese government has designated many clusters, not only the ones you know about such as Shanghai, Shenzhen, and Beijing, or the Pearl River Delta and Greater Bay Area, but also clusters in Western and Central as well as Northeastern provinces to sort of balance the regional development. Some Western companies consider that over-reliance on China manufacturing is not sustainable and have already started shifting production out of China, such as Volvo, which has moved some production to Belgium. The key takeaway here is that you do need to reconsider China manufacturing if you are over-relying on that. But there is still a lot of continued investment in China, particularly in pharmaceutics, electronics, as well as in EVs. Western companies are using that to help them to reduce costs and be close to the market to remain competitive.
How to set up your own manufacturing in China? If you already have a sales office in China, the first thing to evaluate is whether to expand that sales entity to a manufacturing entity in the same city, set up one of your own elsewhere or go for subcontracting. It may be more cost-effective if you outsource, but it may suit your strategic goals if you have your own manufacturing facility. Mrs. Zhang presented a few examples of companies they have assisted in setting up manufacturing in China. In order to sell to China, some companies have to localize their production, including localizing the supply chain.
The first question is how to identify your optimal city in China. There are so many cities in China that all claim they can manufacture all sorts of things. So we shortlist a number of cities and look at their economic profile in terms of the industry alignment, and also whether they have a local supply chain, which is really important for manufacturers, as well as logistics because some of the products are going to be exported. Finally, also look at operational expenditure that includes salaries and the social insurance cost, which actually is a big add-on.
Once you choose a city, there are typically various zones competing for foreign investment. Don't just rely on the presentations, but visit the sites, as many of them are in a very early stage and you might be the only factory operating there. If you're just going for a small factory, then go for the more established industrial parks. Also build up your guanxi or connections with the local government already from the beginning. As a small manufacturer, you may not want to go to Shanghai, because Shanghai is really very costly now, and also to get the government's attention, you need to be very big scale and also advanced. No matter how nice the facility is, the most important thing is the people, the team, and how do you get the right people right from the beginning. If you find someone you like at a particular senior level, it's really important you act quickly, because this kind of talent doesn't stay available long.
Finally, it is important to get the right license and for manufacturing business, you need to specify all the potential products and parts you're going to manufacture. The actual preparation of documents by the parent company is typically underestimated because the level of detail and compliance by the Chinese local registration authorities is very thorough. Even a tiny non-compliance or discrepancy might lead to rejection or lengthier applications.
Mr. Steven Cuypers spoke about the practical side of setting up his company in China. Orfit Industries develops and produces thermoplastic polymers and composite materials for medical devices for three market segments: radiation oncology, physical rehabilitation, and orthotics and prosthetics. The company manufactures polymers by the extrusion method. The company also produces composite materials for the radiation oncology market. Products are introduced to the market through four channels, the most important of which is exclusive or non-exclusive distributors. The company's first steps in China date back to the mid 80s, when the Belgian Foreign Trade Office organized a visit where you could have a booth at the China Medical Equipment Fair in Shanghai. Orfit Industries was the first company to introduce in China the practice of patient immobilization in radiotherapy. The equipment and machines used in radiation are extremely precise. Thanks to the company's thermoplastic masks, patients are immobilized so that the medical practitioner is sure that the patient cannot move with millimeter precision. At first, we thought we would need an exclusive distributor, which later on we found was not really the way to go ahead. After five years in the market, copycats came up. We considered that as normal in view of China's history. The copycats that came up were products for which patents had expired, so there was some indication about what IP is and what it could mean. Being copied today by 10 companies resulted in a gradual slowdown of Orfit's growth.
Mr. Cuypers believes that local presence is really mandatory if you want to be successful in China. The middle class population in China is estimated at around 400 million, so it's a huge potential market. In that market with a huge population, there is since many years a growing cancer incidence, which is due to the lifestyle in China, as many people smoke, even during dinners. Modern radiation therapy is also growing thanks to the government which understood that in order to fight cancer, they had to install multiple cancer treating centers. Today, there are 1,800 triple A hospitals in China, hospitals that are comparable to the service that we know in Belgium or in Europe. Not all of them have cancer centers, but most of them have. In Belgium, there are probably 15 to 20 university hospitals. In the U.S., there are around 300 university hospitals. Another reason why we are present locally is that we want to make sure that our products are available to as many patients as possible anywhere in the world. The last reason is that among Chinese consumers, there is a growing preference for Chinese, for local, for domestic brands. One of my competitors in China told me a couple of weeks ago that for local vendors, most of the time, foreign products are not even considered anymore.
Planning of Orfit's local presence in China started in 2018 with preparations for a joint venture with the at that time exclusive distributor. That attempt of forming a joint venture failed. Instead, Orfit established a wholly foreign-owned enterprise (WFOE) in Ningbo as a 100% daughter company of Orfit Belgium. When Mr. Cuypers announced that the company would not proceed with a joint venture but would invest in a WFOE, my Chinese partner said, now you're really starting to think and act as a Chinese person. When everything in the plant was ready, it couldn't start due to Covid-19. When Mr. Cuypers went back to China in March 2023, as soon as the borders reopened, a lot of things had changed, such as the position of the distributor and the management.
Ningbo was considered to be too far out and it was decided in October 2023 to move the company to Jiashan, a small industrial city in Zhejiang province about one hour travel from Shanghai. The old equipment was outdated and had to be scrapped and raw materials had expired, so the company had to start anew. That was an indication to our Chinese partners that we really meant what we wanted to do in China. The reasons to move to Jiashan were two-fold. The distributor that Orfit worked with on an exclusive basis was acquired by Shanghai Electric, which was involved in a huge scandal with money laundering and the grey economy. The second reason was that Ningbo was a little bit too far from where the action is. In Jiashan, the company is located in an development zone and is supported by the Zhejiang government. The company will not have to pay rental fees for three years and gets support on social security payments for its employees. Representative of the Jiashan government went to visit Orfit's plant in Wijnegem to know more about the company, which created a strong bond with Orfit in Belgium. The company in Jiashan has four people, including Mr. Cuypers as Managing Director, in addition to a General Manager, a Marketing and Sales Strategy Manager and two workers. After getting several licenses, the provincial governmental authorities informed the company it was also necessary to register on the provincial medical product platform in every province. Today, we are only registered in a couple of provinces so sales are still relatively low, Mr. Cuypers explained. There are also many other administrative requirements.
Based on Orfit's experience, there are a number of minimal requirements for success. You have to organize your IP. Never start negotiations with Chinese partners before you have registered your product names or your company name. If you don't do that, and a Chinese party registers your company name or your product names, you have to buy that registration back from them. Obviously, you have to study the competition. You have to understand who's doing what. Linked to that is study the market price for your products. You might find out that products from your competitors are sold at a very high price. There is a heavy impact of the grey economy in that final end-user price, which means you can't ask for the same high price level. You have to find a location for your activities where the local government provides financial incentives. You have to fulfill all requirements with respect to registrations and product labeling. You need to label your products with Chinese characters. You have to comply with local Chinese FDA regulations. If you don't respect those regulations, you are unable to sell. Set up multiple distribution channels. Never trust a company that says, we can handle the whole Chinese territory, the whole Chinese market for you. That is simply impossible. It's a vast country with a very big population, and one company is never able to do that. Find key opinion leaders and make them what they call in China, speakers. These are advocates of your products who will speak loudly and positively about your products in the market. You have to hire local staff for your marketing and sales activity who speak English. You really need someone with a very, very good knowledge of active and passive English, otherwise, communication becomes very difficult. It is imperative to hire a local company for fulfilling your financial requirements. You must also hire a local company to fulfill all your legal requirements. Most importantly, take the time to build a network at different levels, not only the local government level, but within your market. Even form a network with your competitors, maybe one day you may need them. Also make sure that your Belgian owners remain well informed because the route to success may be long and they have to supply you with continuous oxygen to make sure that you will be successful with your endeavors in China. And last but not least, be present in person several times per year. A lot of Chinese people want to speak with higher executives, preferably the CEO or the owner of the company. Once you have that level of connections, you can send other staff, but you should be going at least twice a year yourself.
A Q&A session concluded the webinar.
