More than half of survey respondents said China's business environment has become more political.
European companies in China are focusing too much on risk management as the business environment in the world's second-largest economy becomes increasingly unpredictable and politicized, a business lobby group has warned.
China's European Union Chamber of Commerce and Industry said on Wednesday that around three-quarters of respondents to a survey of its 1,700 members said they had lost interest in China over the past two years amid a “general feeling of uncertainty.” The company announced that it had reviewed its supply chain and exposure.
About 21% of respondents said they planned to expand production in China, and a further 12% said they planned to cut production, the chamber said.
According to the survey, only 1% said they planned to move production entirely outside China.
The findings come “at a time when the global business environment is becoming increasingly politicized and companies are facing very difficult decisions about how, and in some cases, they can continue to engage with the Chinese market.” That's what the lobby group says. This was stated in a report accompanying the investigation.
The Chinese market has become “less predictable, reliable and efficient,” while companies' focus is “disproportionately skewed towards managing risk and building resilience,” the report said.
Foreign companies in China have faced a series of challenges in recent years, including slowing economic growth, ultra-strict coronavirus restrictions, geopolitical tensions between the United States and China, and a national security crackdown.
As the Chinese government seeks to reassure businesses that the country is reopening after the pandemic, authorities have carried out major raids on foreign consulting firms, tightened anti-espionage laws and state secrets laws, and Data sharing beyond the limit is restricted.
Tensions with Europe have also increased since the European Commission launched an investigation in September into whether China's government-subsidized imports of electric cars were squeezing European competitors.
An EU Chamber of Commerce survey found that around 55% of respondents said China's business environment had become “more political over the past year” and that companies are “de-risking” their operations in the country. There is an increasing focus on
“At the corporate level, the amount, complexity, and severity of risks facing businesses has increased dramatically in recent years as politics permeates the business environment,” the report said.
Despite these concerns, Chamber of Commerce President Jens Eskelund urged European companies to reassess their overly cautious actions to avoid inhibiting future growth and innovation.
“It is natural for all parties around the world to seek to ensure the security of their economies, but this must be done in a way that minimizes disruption to business,” Eskellund said.
“Actions taken in the name of risk management and strengthening economic security should be proportionate, targeted and precise and should never become a cover for protectionism.”
Foreign direct investment into China fell to a 30-year low in 2023, with new investment dropping 82% from a year earlier to $33 billion, according to government data.
China's State Council this week announced a new action plan to boost overseas investment, focusing on key industries such as advanced chips and biopharmaceuticals.
The State Council also promised to address practices that discriminate against foreign companies, a long-standing complaint of the foreign business community.
