Ole Kaällenius (front right), CEO of Mercedes, signs a Memorandum of Understanding on cooperation on June 20, 2023 with Zhimin Qian (front left), Chairman of State Power Investment Corporation, in front of Li Qiang (back , l), Prime Minister of the People’s Republic of China and German Chancellor Olaf Scholz (SPD, rear, r).
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BEIJING – European firms in China are finding it harder to operate in the country, even after reopening from Covid, the EU Chamber of Commerce in China found in its latest membership survey, released Wednesday.
Mainland China ended stringent Covid controls in December and authorities pledged to support more business travel in and out of the country.
But the initial economic recovery has lost momentum while regulatory hurdles remain.
“Zero-Covid has come to an end, but other headwinds will have to be addressed if China is to regain its attractiveness,” reads the Chamber report.
The annual Business Confidence Survey found a big increase in the number of firms claiming to have lost opportunities in mainland China because of market access restrictions or regulatory barriers.
While the study found some of this was because of Covid checks, the outlook stays bleak.
“The regulatory environment is not expected to actually improve in the next five years,” Jens Eskelund, president of the EU Chamber of Commerce in China, told reporters.
Ambiguous rules and regulations remain a significant regulatory hurdle for respondents for the seventh yr in a row, the report says.
China has increased regulation in the previous couple of years. Some concerned alleged monopolistic practices in the Web technology sector, the rapid development of which Beijing allowed with minor restrictions. Other recent provisions aimed to ascertain parameters for the protection of personal data, much like the principles of protecting privacy in Europe.
Nevertheless, this yr China has made it clear that it is emphasizing national security and has expanded its counter-intelligence law. News of raids or probes on three foreign consulting firms in China also stirred business leaders overseas.
Eskelund said foreign firms are still waiting for clarity on the recent regulation, much like the rules issued greater than five years ago.
“I feel we’ll should see what it actually looks like in reality,” he said. “We usually are not aware of many firms which have felt a particular impact.”
China’s slowdown in growth is the biggest challenge
The European entrepreneurs surveyed said that their most important challenges were definitely economic issues: slowing growth in China and the world. US-China trade tensions ranked third, in line with the report.
China released economic data data for May, which didn’t meet expectations and showed a slowdown in comparison with the previous month.
“Ultimately, bread and butter is what we’re capable of sell,” Eskelund said. “Economic concerns in this case here [are] is perceived by European firms as more necessary than politics.
Anecdotally, he said members were more concerned about the Chinese economy in recent weeks than at the time of the survey.
The study was conducted from February to early March, the chamber informed.
Impact on foreign investments
Uncertainty and the macroeconomic environment affected foreign investment in China.
The survey found that only 55% of respondents said China was one of the top three destinations for future investment – the lowest since the survey began asking the query in 2010.
“We do not have one [small or medium-sized company] has been coming to China since late 2019,” Eskelund said, noting that this is based on embassy investigations.
China’s Ministry of Commerce didn’t immediately reply to CNBC’s request for comment.
The ministry has named 2023 the “Yr of Investing in China” and native authorities try to just do that legal foreign money. Premier Li Qiang as well met with German firms this week on his first overseas trip in the role he won this yr, state media reported.
Li is also scheduled to offer a keynote address and meet with world business leaders at the World Economic Forum conference in Tianjin, China, next week.
Members of the EU House appreciate the government’s commitment, Eskelund said, noting that business conditions vary by industry.
But he said greater than 1 / 4 of those polled “never expect a big market opening.”