European business cooling towards China but will likely boost investment

A man rides a motorcycle along a street in the snow in Altay, Xinjiang Uighur Autonomous region, China. © Reuters
A recent survey by the EU’s Chamber of Commerce in China shows European companies are re-evaluating their business in the world’s second biggest economy. Some of them are scrapping expansion plans.

According to the study, "a significant 41 percent of European companies are now re-evaluating their China operations and planning to cut costs, including through headcount reduction." This is up 19 percent from 2013. One in ten businesses intends to shift their investment to other markets.

The chamber of commerce added that "Beijing's failure so far to deliver on promises that foreign-invested enterprises will enjoy a more open, competitive market has fostered mounting pessimism."

Thirty-one percent of respondents are pessimistic about future profits in China, which is eight percent more than last year. The gloomy data is connected to an "increasingly hostile" business environment.

Despite this, more than half the businesses polled saw profits growth last year with the majority of European firms remaining committed to China.

The report noted that trade between the EU and China is crucial for both sides. China is Europe's second-biggest trading partner, while Europe is China's biggest market at $1.13 billion per day.

However, when all the obstacles are removed, "a clear majority of European business would likely increase their investment in China,” the chamber added.

Asked about the report by Reuters, China’s Foreign Ministry spokesman Hong Lei said Beijing is consistently seeking ways to improve the business environment for foreign investors and to reduce market access problems.