China makes Western luxury goods, squeezing European middlemen

China makes Western luxury goods, squeezing European middlemen

China’s next step isn’t selling cheaper: it’s capturing the margin currently held by Western intermediaries. This thesis drives an ongoing discussion in the Economy subforum, gaining renewed relevance. The premise is simple: for decades, European brands moved production to China to cut costs, keeping design and branding in Europe while selling at luxury prices. Now, Chinese factories no longer need the middleman. They produce, design, and are starting to sell under their own labels.

Know-how is no longer a secret

The core idea of the opening post is that Chinese companies prepared “from day one” for this moment: they absorbed technical knowledge from Western brands, which only contributed the label. The result, the argument goes, is that they can now “fly solo” and kick out the intermediary. While not new, the context makes it more uncomfortable: if the product is entirely made in China, what remains of European added value?

Some go further, arguing that luxury is essentially a construct of vanity. An €8,000 handbag isn’t worth €8,000, this view suggests: it’s worth what someone pays for the brand. If the label can be printed anywhere, the business model collapses. The common rebuttal is that vanity isn’t bought in China, but in Paris, Milan, or Fifth Avenue. Luxury, they insist, is a different world.

The Swiss watch case: fine print on 'Made In'

A frequently cited example involves Swiss watches. It’s claimed that a decade ago, users traced Rolex materials and parts, concluding component costs were around €300, while the watch sold for €10,000. Other forums reportedly denied this, joking that “Swiss miners dig the iron, smelt the steel, and polish it by hand.”

However, Swiss law nuances this. To bear the “Swiss Made” label, 60% of the movement and case components must be manufactured in Switzerland, and 60% of total production costs must occur there. Technical development, assembly, and final quality control must also happen in the country. Thus, the label isn’t merely decorative, but doesn’t guarantee everything was done in an Alpine workshop.

Can Europe reshore outsourced production?

The overarching question is whether Europe can recover production lost to China. The consensus is that it’s not simple. Specialized labor, raw materials, and infrastructure networks are in China. Additionally, European regulations focus on efficiency and environmental protection, not cost competition with Asia.

Some argue creativity is the solution. “The Chinese are great copyists but lack creativity,” summarizes a popular stance. According to this view, Europe’s advantage lies not in the factory, but in design, branding, and inventing new categories. The problem is that this advantage can also be acquired: by hiring European designers and engineers, or waiting for bankrupt firms to sell assets cheaply.

The debate on vanity and real price

Part of the discussion focuses on luxury consumer psychology. High-end brands have seen sales drop because they became accessible; allowing broader access alienated customers who bought precisely to distinguish themselves. The proposed solution is raising prices to restore exclusivity.

Conversely, some define luxury as a quality rather than a brand: a durable, functional watch versus an accessory that breaks easily. The distinction between luxury and vanity, critics say, was invented by the French, who allegedly can’t tell a potato from an apple. Ultimately, consumers pay for belonging to a group, not object quality.

What China hasn't achieved yet

Not all analysis points in one direction. A common objection is that after four decades making sneakers for Western brands, no Chinese label has emerged capable of selling shoes at €200. Every few years, a Western brand—Nike, Puma, Vans, Hoka—becomes a global desire, even among Chinese consumers. Why don’t Chinese brands occupy this space?

The debate suggests luxury isn’t manufactured, but built. It requires decades of marketing, flagship stores on iconic streets, and lifestyle association. China can produce the object, but hasn’t yet learned to sell the desire. Or so those who believe vanity still holds a European passport argue.

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The most repeated prediction is a wave of bankruptcies among Western premium brands. The more cautious view is that China will take time to enter the luxury space, though it already dominates production. Between these scenarios lies an uncomfortable certainty: intermediaries who only provided the label find it increasingly hard to justify their margins.