by Joe Cash
BEIJING (Reuters) – Slowdowns in the Chinese and global economy are the main issues likely to affect European businesses in China, well ahead of geopolitical tensions with the United States, a survey by the European Chamber of Commerce in China shows. (European Union Chamber of Commerce in China or EUCCC).
The number of European companies considering China as one of the top three destinations for future investment has fallen to a historic low, according to the annual summary document released by the organization on Wednesday. The EUCCC has been compiling this data since 2010.
If Europe and the United States are now facing a drop in demand against a background of rising interest rates intended to curb high inflation, China, for its part, is exposed to a risk of deflation.
According to the EUCCC report, in 2022 there were three times as many European companies having noted a drop in their revenues from China than in 2021. The weight of China in the profits made by companies in worldwide also fell for the second consecutive year.
“The deterioration in the business climate that has occurred over the past three years has been significant and cannot be reversed overnight,” writes the organization which defends the interests of EU companies operating in China.
BASF, Maersk, Siemens and Volkswagen are among the members of the EUCCC.
The organization’s report, which draws on surveys of its members between February and early March, also shows that a record number of companies lost business last year due to regulatory barriers and… barriers to market access.
President Xi Jinping’s growing emphasis on national security – particularly the authorities’ recent offensive on consulting and auditing firms – has left many foreign companies uncertain about where to go. in a market where regulations are sometimes worded rather vaguely.
“With new and pending EU and US legislation expected to require many companies to be more transparent about their business in China, the trend towards supply chain diversification and divestment is expected to strengthen in the medium term. term,” notes the EUCCC.
Despite China’s abandonment of the “zero COVID-19” policy late last year, foreign direct investment in the country has been sluggish. Denominated in dollars, they even fell by 5.7% between January and May compared to the same period a year ago.
The EU’s trade deficit with China widened in 2022 to €396 billion, leading European Commission President Ursula von der Leyen to urge the EU bloc to ‘disengage’ economically and diplomatically from China.
(Reporting Joe Cash; French version Claude Chendjou, editing by Kate Entringer)
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