Many businesses are rethinking Chinese production strategies, weighing everything from a decoupling to an outright departure. However, transitioning from a “Made in China” to a “Leave China” philosophy – regardless of degree – is both ill-advised and impossible. 

Still, a new plan is needed in a world where massive global disruption is the norm. The pandemic, supply chain kinks, environmental concerns, rampant inflation, talent wars, and geopolitical tension have all wreaked havoc. 

To better prepare for the challenges ahead, Chinese operations need to become more resilient, capable of significantly contributing to a global operation but able to run on their own if necessary. Local-for-local footprints, legal frameworks, and supply chain resilience should be strengthened.  

Alternatives are necessary, too. Other cost-effective regions need to be mined, and new frontiers explored to supplement China’s outsized role. For EMEA players preparing for the potential loss of Chinese value-add, Northern Africa needs to play an increasingly vital role in the global strategy.

Abandoning China not an option

China remains a vibrant and critical hub of manufacturing, procurement, innovation, and economic activity. This reality should be a guiding light for any reshoring or nearshoring activity. 

Consider, for instance, the dependency of the European economy on Chinese value chains for imports and innovation. Europe receives 50% of its imports from China; globally Chinese exports increased by 7% in 2022 compared to 2021, after surging by 30% in 2021. Europe received goods worth €400 billion in 2021 from China, representing 50% of imports overall. On the export side, Europe shipped goods worth €200 billion to China, representing 20% of exports.  

Additionally, local Chinese supply chains are critical, having been developed for Western economies and now integral to supplying increasingly strong domestic markets with unique needs and demand profiles. This is seen most prominently in the automotive industry, where global automakers rely on China for both components for export and significant revenue from local markets. 

North Africa becomes increasingly attractive; Europe attracts Tech

Still, recent events underscore the need for other geographic options. To address end-to-end manufacturing and distribution challenges, several variables come into play. These include political stability, labor costs, energy prices, and logistics. 

Increasingly, businesses are looking to Northern Africa for cost advantages, particularly in labor-intensive industries. Tunisia, Morocco, and Egypt top the list of individual countries on the radar. 

To analyze the advantage this region presents, weigh the trajectory of labor costs in both Eastern Europe and Northern Africa. 

Cheaper Eastern European countries have a range of attractive labor costs, from Bulgaria’s €6/hr average to the Czech Republic's €11/hr. Hungary, Romania, and Poland are also in the ~€8/hr to €9/hr range. Costs in these countries are rising, however, increasing between 5% and 10% per year between 2017 and 2021, and escalating beyond 10% in 2022. 

In Morocco, rates for direct labor are around ~€2/hr; while engineers command €4/hr. In Egypt, labor is even lower at ~€1/hr. In Tunisia, such rates fall to ~€0.65/hr. 

Infrastructure development in these countries has also accelerated, as many labour-intensive industries are drawn to these lower labor costs. While political stability remains a concern, this strengthening of facilities and systems further enhances the logistical advantages that North Africa can offer Western European destinations, including France, Spain, Portugal.

Looking at industrial output, Egypt notched a strong compound annual growth rate of 9% between 2017 and 2021. That compares to Eastern European countries reporting a CAGR of roughly 4% over the period. 

There is also an energy price advantage. Rates in Morocco are equal to €0.1/kWh, while in Tunisia and Egypt they fall below €0.05/kWh. That compares to Eastern European prices ranging between €0.15/kWh and €0.2/kWh (Poland, Romania and Bulgaria), rising to €0.5/kWh in the case of the Czech Repubic. 

For high-tech industries that are not labor intensive but require highly skilled labor, those settling in Europe are focusing on locations where high subsidies are available. 

For instance, in semiconductor industries, investment in Europe in construction and equipment in 2022 equaled roughly €9.5 billion. Around 85% of that was concentrated in Ireland, Israel, France, and Germany. The only Eastern European country with some relevance was the Czech Republic, with €24 million in attracted investments.

Urgent action required 

Taking action to set up a more resilient China footprint requires work on several fronts. 

In China, local supply chains, legal entities, and organizational structures need to be analyzed and reinforced. No one can afford to abandon China. Innovation, global revenue models, and sourcing models rely on this market. 

Establishing supplemental operations in North Africa is growing in its attractiveness, but it is not a one-size-fits-all solution. High-tech industries may need to seek out other suitable geographies. Logistical challenges may also force businesses to pursue creative solutions. 

No matter the final strategy, one thing is clear: Time is not on anyone’s side. The path to a more resilient global footprint must be forged now. While no one can predict where and how the next disruptive force will emerge, everyone can control the effectiveness of their plan to respond.


(1) Labor Rates: Eurostat, last update May 2022. Labor cost include direct remunerations, bonuses, and allowances paid by an employer in cash or in kind to an employee in return for work done, payments to employees' saving schemes, payments for days not worked, and remunerations in kind such as food, drink, fuel, company cars, etc.; for North Africa: Mercer 2022 Global Pay Summary

(2) Energy Costs: EMEA December 2022 Household Energy Price Index, used as a proxy to estimate industrial energy costs, due to missing recent data. North Africa: Commercial prices as of June 2022 retrieved from 

(3) Chinese/European Export and GDP data: Trademap, Worldbank, General administration of customs of the PRC, European Commision