Favco managing director: Profit margin under pressure amid intense Chinese competition, higher costs

Favco managing director Michael Khoo has highlighted growing concerns over profit margins amid intensifying competition from Chinese manufacturers and rising operational costs. The company, which specializes in heavy industrial equipment, has faced mounting pressure as Chinese firms continue to expand their global market share in sectors such as construction and port machinery. This trend is part of a broader pattern in which Chinese companies, supported by large-scale industrial policies and domestic overcapacity, are undercutting global competitors with lower prices and increasingly sophisticated products.

Khoo noted that the competitive landscape has shifted significantly in recent years, with Chinese firms moving up the value chain and challenging traditional market leaders in high-value industries. The European Central Bank has also observed a decline in the euro area’s export competitiveness, particularly in energy-intensive sectors such as automotive and machinery, where Chinese price reductions have eroded market shares. These dynamics are compounded by China’s export-driven growth model, which has led to a flood of goods into global markets, further squeezing margins for firms like Favco.

In addition to external pressures, Favco is grappling with higher input costs, including energy and raw materials, which have been exacerbated by global supply chain disruptions and geopolitical tensions. The company’s annual report for 2023 underscores the need for strategic adaptation to maintain long-term profitability in an increasingly fragmented global trading environment. As Chinese industrial policy continues to reshape global markets, firms like Favco must navigate a complex balance between cost control, innovation, and market diversification to remain competitive.