Post-Pandemic, The Europeans Want Chinese To Do More To Have Their Money

The new head of the European Union Chamber of Commerce in China, Jens Eskelund, has called on China to take more steps to restore confidence among European companies amid the country's post-pandemic recovery, as reported by Nikkei Asia.

Eskelund, who assumed the presidency of the chamber in May, noted that while there has been increased engagement from Chinese government delegations, it remains to be seen whether this will lead to tangible results.

He emphasised the need for the Chinese government to address concerns about market access and create a more transparent regulatory environment to restore confidence among European companies.

Foreign business sentiment in China hit record lows during the pandemic due to lockdowns and movement restrictions under China's zero-COVID policy.

This has led some companies to reduce investment or consider exiting the Chinese market. Despite initial optimism following the easing of COVID restrictions, confidence has declined as tensions between China and the West have escalated.

Eskelund highlighted the European Chamber's latest member survey, which revealed concerns about China's attractiveness as a business destination.

The survey indicated that 10 per cent of members have relocated or plan to relocate their Asian headquarters out of China, while 53 per cent have no plans to expand their operations in China this year. Additionally, 38 per cent of respondents reported that their Chinese customers and suppliers have shifted investment out of the country.

The challenging business environment and weaker financial results were cited as key factors contributing to this sentiment.

Anxiety among Chamber members is also fueled by concerns over supply chain restrictions and carbon emission rules in China. Restrictions on sourcing products from Xinjiang, where forced labor allegations have emerged, and the EU's Carbon Border Adjustment Mechanism (CBAM) have added to the uncertainty.

The CBAM will increase tariffs on carbon-intensive products imported into the EU, potentially prompting factory owners to relocate to countries with more renewable energy sources.

Eskelund stressed that while the COVID-19 pandemic and geopolitical tensions have highlighted the need for diversified value chains, investing in multiple countries is less efficient and more costly compared to investing solely in China. Many European companies have become more cautious in their investment decisions as a result.

Outgoing President Joerg Wuttke echoed these concerns, describing the last few months as the worst in his ten-year tenure at the Chamber. He emphasised the challenges faced by European companies in the manufacturing sector, particularly in the automotive industry.

Wuttke warned that the situation could worsen for Chamber members as China pursues greater self-sufficiency, citing China's Made in China 2025 initiative as an example of the country's aim to become a global leader in certain sectors, potentially reducing its reliance on imports.

Overall, the European Chamber is urging China to address the concerns of European companies and take measures to restore confidence, particularly in terms of market access and regulatory transparency.