European companies in China are finding it more difficult than ever to do business in the People’s Republic. This is the result of a survey by the EU Chamber of Commerce in China.
European companies are increasingly having problems finding or maintaining market access in China. The EU Chamber of Commerce found this out. The chamber represents around 1,600 European companies doing business in China. The optimism is waning, said the President of the European Chamber of Commerce, Jens Eskelund, at the Presentation of the results in Beijing.
68 percent of the member companies surveyed said that business has become more difficult – more than ever before. 44 percent of those surveyed are pessimistic about corporate profits in the next two years – this is also a high. A problem for many: more difficult market access and bureaucratic hurdles.
“The worries dominate”
More than half of companies cited China’s struggling economy as their biggest challenge – significantly more than in the last survey.
“Concerns about the Chinese economy are dominating this year,” said Chamber of Commerce President Jens Eskelund. “Companies are struggling with weak demand, falling inventory prices, and many industries are seeing what could be called overcapacity.”
Size Overcapacity are problematic
In the past, the Chinese state and party leadership has prioritized industries on several occasions. This led to massive overcapacity and rapidly falling prices, said Eskelund.
Among other things, the solar industry in Germany and Europe went bankrupt. “And that’s why we’re a little nervous, because China has prioritized three big industries: electric cars, lithium batteries and solar panels. And we’re already seeing that there’s a lot of excess capacity there.”
The Chamber of Commerce President warns: “The last thing we need is to create a lot more supply for which there is no demand. That makes it more difficult for everyone.” There is concern that European companies will lose out simply because they have to work under different conditions than Chinese companies.
EU Commission is reviewing subsidies
The EU Commission is currently investigating the extent to which China’s leadership has promoted certain industries – with subsidies that violate international competition rules.
Ultimately, there is a risk of punitive tariffs on Chinese products such as electric cars in order to protect the domestic industry. German car manufacturers are fundamentally against such punitive tariffs because they fear disadvantages on the Chinese market.
China’s exports are recovering slightly
Overall, China’s economy has not recovered as expected since the end of the strict zero-Covid policy a year and a half ago. The highly indebted real estate sector is still deep in crisis. Many people, especially young people, cannot find a job.
China’s exports, which are important for the export-oriented economy, nevertheless rose slightly again in April. They increased by 1.5 percent compared to the same month last year, as the Chinese customs announced. Imports grew by 8.4 percent in April. Exports and imports were still falling in March.
“The growth has accelerated compared to the beginning of the year and also to the same period last year. The positive trend in foreign trade is continuing,” explained customs spokesman Lü Daliang.
Words must be followed by days
Many foreign companies in China do not share the optimism. More than half of the companies surveyed by the European Chamber of Commerce plan to reduce costs in order to adapt to the difficult environment.
The Chinese government regularly indicates that it will improve business conditions for companies, said Chamber of Commerce President Eskelund. Action must now be taken to restore investor confidence.