‘Why China?’ EU business group says strategic rethink may be needed for foreign investors
EU Chamber of Commerce’s annual position paper warns that problems facing members could be ‘permanent features’ in China operations
Foreign business operations in China are at a “tipping point”, teetering on the edge of the nation’s rapidly deteriorating economy as their declining investment-return outlook may no longer justify the mounting risks, according to a leading European business association.
In its annual position paper, the European Union Chamber of Commerce in China said many investors are now confronted with the reality that the problems they face in the Chinese market may be “permanent features that require a substantial strategic rethink”.
Profit margins in China are equal to or below the global average for 71 per cent of EU chamber members, and 44 per cent are pessimistic about their future profitability – the highest level since records started in 2012, according to the report.
“If you both have a complicated market, [and] your returns are lower than the global average, why China,” asked chamber president Jens Eskelund during a press conference last week.
“The big thing that has changed relative to the period before 2021 is the fact that we have seen the domestic economy in China deteriorate quite rapidly,” he said. “And that means that, in addition to the perennial issues we have been facing in regulatory terms, we are now also beginning to face issues in terms of our ability to make money on the Chinese market.”
You’ve now got shareholders looking at this in a very coldhearted way
Other factors dragging heavily on business confidence include overcapacity, perennial market access and regulatory barriers – such as in government procurements – and a highly politicised business environment, according to the report.
