European firms show extraordinary pessimism about China
According to the annual survey released on Wednesday by the European Union Chamber of Commerce, confidence among European businesses operating in China has reached a record low. The survey, which draws on responses from 503 member companies gathered in January and February, underscores increasing apprehensions that emerged even prior to the further escalation of US-China trade tensions in April. Only 29 per cent of respondents expressed confidence regarding growth prospects in China over the next two years, marking the lowest level since 2013. An equal 29 per cent expressed outright pessimism, marking the highest level recorded in the survey’s history. Optimism regarding profitability has decreased by three percentage points from the previous year, now standing at a mere 12 per cent, marking yet another historic low. Conversely, 49 per cent conveyed a sense of pessimism—marking a new record.
The EU Chamber of Commerce has called on the Chinese government to fully execute the recently announced reforms designed to enhance the environment for foreign enterprises. Jens Eskelund, president of the Chamber, remarked that apprehensions regarding China’s domestic economy and ongoing producer-price deflation were significantly impacting both European and Chinese companies. “Uncertainty resulting from escalating trade and geopolitical tensions, concerns about China’s domestic economy, and persistent producer-price deflation weigh on the minds of both European and Chinese companies,” Eskelund said.
The survey additionally revealed that market access and regulatory hurdles continue to pose significant challenges. Approximately one-third of respondents indicated that they do not anticipate substantial advancements in this domain—consistent with the sentiments expressed last year. Beijing has pledged to uphold an open market for foreign enterprises. In February, a new policy framework was approved to attract overseas investment, which involved the removal of restrictions on foreign manufacturing investments and the expansion of industries accessible to foreign firms.
Among those surveyed, 71 per cent identified China’s economic slowdown as one of the top three risks to their operations in the country. This was succeeded by tensions between the US and China, along with regional geopolitical conflicts. “A new, more fragmented globalisation is taking shape, while China’s economy is stabilising with slower growth and greater competition—signalling transformation rather than decline,” stated Denis Depoux, global managing director of Roland Berger, which co-conducted the survey. He emphasised that companies must adapt by localising operations and forming stronger partnerships with domestic firms.
The report highlighted the escalating trade tensions between the EU and China, as both parties have initiated several trade investigations in recent months. Eskelund emphasized the ramifications of China’s April export controls on critical minerals, which have interrupted production in numerous European operations. “A number of companies in Europe will be running out of some of these minerals and production this week,” Eskelund stated.
