BEIJING, Sept 11 (Askume) – European companies in China are skeptical the Chinese government has a credible plan to boost demand in a weak economy or will deliver on long-term promises, a European business lobby said on Wednesday. Wishing to invest in the country is declining.
The European Union Chamber of Commerce in China said in its latest position paper that its more than 1,700 member companies now accept the fact that the problems they face are not “growing problems” in emerging markets, but permanent problems.
“Company headquarters and shareholders are increasingly recognizing that the returns on investment in China are no longer commensurate with the risks involved,” the chamber said, adding that profit margins for nearly two-thirds of its members in China have fallen below the global average.
European Commission data shows that in 2023, EU foreign direct investment flows to China will fall 29% from the previous year to 6.4 billion euros (US$7.06 billion).
“With many other markets offering similar returns on investment, as well as greater predictability and legal certainty, it is becoming increasingly difficult to justify continued investment in the Chinese market at previous levels,” the chamber said.
The chamber said European companies must fight Chinese rivals receiving unfair subsidies, a highly politicised business environment, President Xi Jinping’s growing national security concerns, and market access and regulatory barriers.
But the “main concern” is the slowdown in China’s economy.
After a disappointmentAfter the second quarter, policymakers signaled they were ready to abandon their strategy of pumping money into infrastructure and instead focus on new stimulus for households.
But beyond the ruling Communist Party’s top decision-making body’s pledge to revive the economy and a $19 trillion plan to subsidize trade in consumer goods, economists are still waiting for more concrete plans.
Citing a plan put forward after the party’s Third Congress, the Chamber of Commerce said it “expresses the intention to step up efforts to build a perfect domestic demand system, but the document does not specify how . “
“Since the total budget is about 210 yuan ($29.52) per capita, only a portion of which will reach domestic consumers, this programme alone is unlikely to help achieve the target,” the chamber said.
BASF (BASFn.DE) , Maersk (MAERSKb.CO) , Siemens (SIEGn.DE) and Volkswagen (VOWG_p.DE) are members of the chamber.
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