European companies are increasingly pessimistic about the prospects in China: some are already directing their investments elsewhere

About 64 percent of respondents said it had become more difficult to do business in the country in the past year, according to survey data released Wednesday by the European Union Chamber of Commerce in China. That’s a record since the House first asked the question in its 2014 poll.

“The business climate has deteriorated significantly over the past three years and this cannot be reversed overnight,” said the chamber’s report, which included 570 responses received between February and March this year.

“Due to the more complex and unpredictable business environment in China, the investment and operational strategies of European companies are adjusted accordingly.”

European businesses are facing a veritable storm of challenges in China, which has prompted them to think about ways to mitigate or hedge their risks.

China’s economic recovery from the lifting of pandemic-related restrictions has been uneven, with still weak business and consumer confidence weighing on growth. It was the economic slowdown that respondents identified as the biggest business challenge, eclipsing worries about global economic growth, the US-China trade war and the COVID-19 pandemic.

Geopolitical tensions with the West also remain high, forcing companies to “closely monitor” sanctions and export controls that could affect their operations. This year, the EU intends to propose new monitoring of critical technologies to strengthen existing security mechanisms to counter strategic rivals, including China.

Commenting on the geopolitical tensions, the survey’s authors said: “European businesses are facing increasing political pressure from China, Europe and third-party stakeholders and are being torn in different directions as that consumer demands are becoming increasingly politicized”.

The weakening confidence of foreign companies operating in China is already affecting their investment plans. Foreign investment in China has declined in recent months. About 11 percent of survey respondents said they had already moved some of their investments overseas – the same number of respondents who took part in last year’s survey said they considered the possibility of doing so.

The share of respondents who named China as one of the top three destinations for future investment fell to an all-time high of 55%.

Recently, foreign companies that still see China as a crucial business opportunity are seeing encouraging signs. 63 percent of survey respondents said they would be willing to increase their investment in China if trade and regulatory barriers were removed.

“The government has an opportunity to prove that the pro-business promises recently shared by its leaders are not just words,” the European Parliament report says.

The US business community has also expressed encouragement recently, particularly following US Secretary of State Antony Blinken’s trip to China this week, where he met with President Xi Jinping. He was the highest ranking US official to visit the country in the past five years.

Blinken’s meeting with Xi Jinping “sent a strong signal to the Chinese business community and public that American businesses are welcome in China,” Michael Hart, president of the American Chamber of Commerce in China, said in an interview. given to Bloomberg Television on Wednesday. But Mr. Hart acknowledged that American companies, like European companies, were reconsidering their investments.

“Of course companies recognize that they are looking at risks in their supply chains,” he said. But “companies that say they’re here to stay are still in the majority.”

Source: The Delfi





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