European businesses in China are facing more difficulties as the country moves beyond the COVID-19 crisis. The latest survey from the EU Chamber of Commerce in China, released on Wednesday, shows that despite the relaxation of COVID-19 measures, conditions remain tough for European companies.
Even though mainland China lifted strict COVID-19 controls in December and showed support for increased business travel, European companies are finding it hard to recover. The initial economic recovery has slowed down, and regulatory obstacles are still present, raising concerns about the future of their operations in China.
The annual business confidence survey by the Chamber revealed a significant increase in companies reporting missed opportunities in mainland China due to market access restrictions and regulatory barriers. While some difficulties stem from past COVID-19 restrictions, the overall outlook remains pessimistic.
According to Jens Eskelund, president of the EU Chamber of Commerce in China, there is little hope for a significant improvement in the regulatory landscape in the next five years. The survey indicated that unclear rules and regulations continue to be the primary regulatory challenge, maintaining their top spot for the seventh consecutive year.
A record share of European companies say doing business in China is getting more difficult, according to a new survey source
— Bloomberg (@business) June 21, 2023
Recent years have seen China implement stricter regulations, particularly targeting alleged monopolistic practices in the internet technology sector. New rules have also been introduced to set standards for personal data protection, similar to European privacy regulations. However, China’s focus on national security and the expansion of counter-espionage laws have raised further concerns among foreign businesses. Reports of raids and investigations involving foreign consulting firms in China have added to the anxiety felt by international business leaders.
The main obstacles for European companies in China are economic challenges, with slowing growth in China and globally ranking as top concerns. U.S.-China trade tensions were listed as the third major challenge. China’s economic data for May fell below expectations, indicating a slowdown compared to the previous month.
The uncertainty in the macroeconomic environment has also dampened foreign investment in China. According to the survey, only 55% of respondents consider China one of the top three destinations for future investments, the lowest number since the survey began in 2010. This decline in confidence is reflected in the absence of new small and medium-sized companies entering China since the end of 2019.
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