Record Number of European Companies Struggle to Do Business in China: Survey

Jens Eskelund, the new head of the European Chamber of Commerce, has launched a groundbreaking survey that reveals a significant decline in trust among European businesses operating in China. The survey, which collected data from 570 companies, highlights the challenges faced by these businesses and their pessimistic outlook for the future.

According to the survey, a record 64 percent of companies reported that it has become more difficult to do business in China. Many companies also complained about missed business opportunities due to poor market access and regulatory hurdles. Shockingly, 11 percent of companies have already withdrawn their investments from China.

What is particularly concerning is that the confidence of these companies has fallen even further compared to the catastrophic lockdown experienced last year. Only 55 percent of companies surveyed expressed optimism about the future, a 6 percent decrease from 2022.

These findings contradict the statement made by Chinese Prime Minister Li Qiang, who is currently visiting Germany and speaking about the economic recovery of the People’s Republic. However, European businesses are calling for more than just talk and are demanding concrete actions to address the challenges they face in China.

The survey also highlights the decreasing attractiveness of the Chinese market. The biggest concern for companies is the economic slowdown in China, followed by the global economic situation and escalating trade wars. Companies reported discrimination against Chinese state-owned companies, non-transparent regulations, and arbitrary inspection visits by authorities. As a result, 26 percent of respondents believe that they will never see a meaningful market opening in China.

Geopolitical risks also play a significant role in the declining trust of European businesses. The recent Russian war of aggression against Ukraine has heightened awareness of these risks. Chinese President Xi Jinping’s insistence on reserving the right to use military means if necessary on the Taiwan issue further adds to the concerns.

The survey results paint a bleak picture for European businesses operating in China. It is clear that significant challenges and uncertainties lie ahead, and businesses are calling for concrete actions to address these issues.Title: Foreign Companies Shifting Investment Out of China as Confidence Plunges, Survey Reveals

Date: June 21, 2023

Location: Peking

Jens Eskelund, the newly appointed head of the European Chamber of Commerce, has conducted a groundbreaking survey that highlights a significant decline in trust among foreign companies operating in China. The survey, which collected data from 570 companies, reveals a record 64 percent of respondents stating that it has become more challenging to conduct business in China. Additionally, a similar number of companies reported missed business opportunities due to market access issues and regulatory hurdles. Alarmingly, 11 percent of companies have already withdrawn their investments from China.

What is particularly concerning is that the confidence of these companies has dropped even further compared to the previous year’s catastrophic lockdown. Only 55 percent of the surveyed companies expressed optimism about the future, a decrease of 6 percent from 2022.

These findings contradict the statement made by Chinese Prime Minister Li Qiang, who, during his visit to Germany, spoke of the economic recovery of the People’s Republic and advocated for “business as usual.” However, local representatives, such as Carlo D’Andrea from the Chamber of Commerce in Shanghai, emphasize the need for tangible actions rather than mere rhetoric.

The survey also sheds light on the reasons behind the declining attractiveness of the Chinese market. The most significant concern for companies is the economic slowdown in China, followed by global economic conditions and escalating trade wars. Companies have reported discrimination against Chinese state-owned enterprises, non-transparent regulations, and arbitrary inspection visits by authorities. As a result, 26 percent of respondents believe that meaningful market opening in China is unlikely to occur.

Geopolitical risks also contribute to the declining confidence in China as a business destination. The recent Russian war of aggression against Ukraine has heightened awareness among companies, and Chinese President Xi Jinping’s insistence on reserving the right to use military means if necessary regarding the Taiwan issue adds to the uncertainty.

The survey conducted by the European Chamber of Commerce highlights the growing concerns and challenges faced by foreign companies operating in China. The findings indicate a significant shift in investment and Asian headquarters out of China as confidence continues to decline. It remains to be seen how Chinese authorities will address these issues and restore trust among foreign investors.

What are the main concerns expressed by European businesses operating in China, as highlighted in the survey?

Erning is that the confidence of these companies has fallen even further compared to the challenging conditions experienced during the pandemic lockdown last year. Only 55 percent of companies surveyed expressed optimism about the future, marking a 6 percent decrease from the previous year.

These findings contradict the statement made by Chinese Prime Minister Li Qiang, who is currently visiting Germany and discussing the economic recovery of the People’s Republic. European businesses are not satisfied with mere words and are demanding concrete actions to address the challenges they face when doing business in China.

One of the main concerns highlighted in the survey is the economic slowdown in China, followed by the global economic situation and escalating trade wars. Companies also reported facing discrimination against Chinese state-owned companies, non-transparent regulations, and arbitrary inspection visits by authorities. As a result, a significant portion of the respondents (26 percent) believe that they will never witness a meaningful market opening in China.

Geopolitical risks, notably the recent Russian aggression against Ukraine and Chinese President Xi Jinping’s stance on Taiwan, further contribute to the declining trust of European businesses in China.

Overall, the survey results paint a bleak picture for European businesses operating in China, indicating significant challenges and uncertainties ahead. Companies are calling for concrete actions to address these issues and improve the business environment in China. Foreign companies are shifting their investments out of China, highlighting the urgent need for comprehensive reforms to restore confidence and attract foreign investment.

Source:

[1] Business Confidence Survey 2022 The annual survey shows that while most European companies in China posted positive revenues and were profitable in 2021, doing business became more …

URL: https://www.europeanchamber.com.cn/en/publications-business-confidence-survey