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 the latest version of its 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 ones.
“A turning point has been reached and investors are now taking a closer look at their operations in China as the challenges of doing business are starting to outweigh the benefits,” said chamber president Jens Asklund.
“It has become very difficult to make money in the Chinese market,” he said at an event.
European Commission data showed EU foreign direct investment flows to China fell 29% in 2023 from the previous year to 6.4 billion euros ($7.06 billion), while the Chamber of Commerce said China’s margins fell for nearly two-thirds of members. The country’s score is below or equal to the global average.
“With many other markets offering similar investment returns 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’s report 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 the chamber said there was widespread fatigue among European businesses over the poor prospects.
“At the start of the new millennium, the reform plans announced by the Chinese government were viewed as credible by foreign companies,” the report says. “Now, after more than a decade of largely unfulfilled promises, doubts are growing about China’s commitment to reform.”
Chinese Foreign Ministry spokesman Mao Ning said at a regular press conference on Wednesday that Beijing will continue to implement reforms to create a more market-oriented and international business environment.
But economists are still waiting for more concrete plans to revive the consumer market of 1.4 billion people, beyond promises made by the ruling Communist Party’s top decision-making body in July to reopen consumer goods and recent subsidized business schemes.
The chamber said the trade-in program is unlikely to significantly boost domestic consumption as its per capita budget is only 210 yuan ($29.52).
“The government needs to look at how to help China regain its status as Europe’s top destination for foreign direct investment,” the chamber’s Eskelund said.
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