European companies operating in China are encountering increasing difficulties, even as the country emerges from the grips of the COVID-19 pandemic. The EU Chamber of Commerce in China’s latest member survey, released on Wednesday, revealed that business conditions remain challenging for European businesses despite lifting COVID-19 restrictions.
While mainland China ended its stringent COVID-19 controls in December and expressed support for increased business travel, European companies are struggling to regain their footing. The initial economic rebound has stalled, and regulatory hurdles persist, creating concerns about the future of their operations in China.
The Chamber’s annual business confidence survey highlighted a significant rise in companies reporting missed opportunities in mainland China due to market access restrictions and regulatory barriers. While some challenges can be attributed to previous COVID-19 controls, the overall outlook remains bleak.
According to Jens Eskelund, president of the EU Chamber of Commerce in China, there is little expectation of a significant improvement in the regulatory environment over the next five years. The survey revealed that ambiguous rules and regulations continue to be the top regulatory obstacle, marking the seventh consecutive year they have held this position.
A record share of European companies say doing business in China is getting more difficult, according to a new survey https://t.co/bHqscsdTRe
— Bloomberg (@business) June 21, 2023
In recent years, China has implemented increasingly stringent regulations, particularly targeting alleged monopolistic practices in the Internet technology sector. New regulations have also been introduced to establish guidelines for personal data protection, similar to European privacy rules. However, China’s recent emphasis on national security and the expansion of its counter-espionage law have further heightened concerns among foreign businesses. Reports of raids and investigations involving foreign consulting firms in China have added to the unease felt by business leaders abroad.
Economic challenges pose the greatest obstacles for European companies, with slowing growth in China and the world ranking as their top concerns. U.S.-China trade tensions were listed as the third major challenge. China’s economic data for May fell short of expectations and indicated a slowdown compared to the previous month.
The uncertainty and macroeconomic environment have also had a dampening effect on foreign investment in China. According to the survey, only 55% of respondents considered China as one of the top three destinations for future investments, the lowest figure since the survey began in 2010. This decline in confidence has been reflected in the lack of new small and medium-sized companies coming to China since the end of 2019.