SUMMARY
- The EU Chamber of Commerce reveals difficulties European businesses face operating in China amidst fading economic rebound and persistent regulatory hurdles.
- Ambiguous regulations remain the top obstacle, as foreign firms seek clarity on new rules while dealing with economic concerns.
- Only 55% of businesses view China as a top investment destination, marking the lowest level since 2010, despite China's attempts to court foreign investment.
Operating in China has proven to be a tough nut to crack for European businesses, even after the pandemic has been controlled and the country has opened its borders. This daunting discovery was revealed in the most recent survey by the EU Chamber of Commerce in China.
Since China lifted its rigorous Covid restrictions in December and authorities promised to facilitate business travel, an initial economic upswing has been observed. But this renewed vigor seems to be fizzling out amidst persistent regulatory challenges. The Chamber's report plainly states, "China may have succeeded in its fight against Covid, but it needs to tackle other challenges head-on if it hopes to remain an attractive business hub."
The annual survey has shown an alarming rise in the number of companies claiming they missed out on lucrative deals in mainland China due to the restrictions imposed on market access or regulatory barriers. While some of these limitations were attributed to Covid controls, the prognosis for future business conditions remains bleak. Chamber President, Jens Eskelund, conveyed his pessimism, stating there is "no anticipation of any improvement in the regulatory environment within the next half-decade."
The ambiguity in rules and regulations for the seventh consecutive year remains the primary hindrance for respondents, as stated in the report. Over recent years, China has beefed up its regulations, targeting alleged monopolistic practices within the tech sector, which had previously enjoyed rapid growth with minimal restrictions. In parallel, new rules aim to protect personal data, mirroring European privacy norms.
This year, however, China has shown a stern focus on preserving national security and has widened its counter-espionage law. News of investigations at three foreign consulting firms has caused a ripple of anxiety among global business leaders. According to Eskelund, international businesses are eagerly awaiting clarification on the new regulation.
In addition to the regulatory challenges, European businesses have been grappling with economic concerns, such as the slowing growth in China and globally. Interestingly, Eskelund observed that members seemed more anxious about China's economy than political issues. Yet the complex uncertainty and macroeconomic conditions have significantly impacted foreign investment in China.
Since the survey's inception in 2010, only 55% of the respondents claimed China as one of their top three future investment destinations, the lowest yet. The Ministry of Commerce in China did not respond to CNBC's request for comment but has labeled 2023 as the "Invest in China Year". The Premier, Li Qiang, has embarked on his maiden overseas trip to Germany in this role to meet business leaders and woo foreign investment. However, over a quarter of the respondents remain pessimistic, with little expectation of the market opening up meaningfully.
WOM Money Picks
Be a part of the winning team | 81% Success Rate.