European companies cut costs, scale back investments in China as its economy slows
European companies are cutting costs and scaling back investment plans in China as its economy slows and fierce competition drives down prices, according to an annual survey released Wednesday.
Their challenges reflect broader ones faced by a Chinese economy hobbled by a prolonged real estate crisis that has hurt consumer spending. Beijing also faces growing pushback from Europe and the United States over surging exports.
'The picture has deteriorated across many key metrics,' the European Union Chamber of Commerce in China said in the introduction to its Business Confidence Survey 2025.
The same forces that are driving up Chinese exports are depressing the business outlook in the Chinese market. Chinese companies, often enticed by government subsidies, have invested so much in targeted industries such as electric vehicles that factory capacity far outpaces demand.
The overcapacity has resulted in fierce price wars that cut into profits and a parallel push by companies into overseas markets.
In Europe, that has created fears that growing imports from China could undermine its own factories and the workers they employ. The EU slapped tariffs on Chinese EVs last year, saying China had unfairly subsidized electric vehicle production.
'I think there's a clear perception that the benefits of the bilateral trade and investment relationship are not being distributed in an equitable manner,' Jens Eskelund, the president of the EU Chamber in China, told reporters earlier this week.
He applauded efforts by China to boost consumer spending but said the government must also take steps to ensure that supply growth doesn't outpace that in demand.
The survey results show that the downward pressure on profits increased over the past year and that a fall in business confidence has yet to bottom out, Eskelund said. About 500 member companies responded to the survey between mid-January to mid-February.
'It is just very difficult for everyone right now in an environment of declining margins,' he said.
© Copyright 2025 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Diplomat
4 hours ago
- The Diplomat
If China and India Mend Ties, Will South Asia Finally See More Stability?
With Chinese Foreign Minister Wang Yi's recent visit to New Delhi from August 18 to 20, and Indian Prime Minister Narendra Modi preparing for his first visit to China in seven years for the upcoming Shanghai Cooperation Organization (SCO) summit in Tianjin, China, the South Asian region is on the brink of significant changes. Most of the analysis on the subject emphasizes the contentious history of Sino-Indian relations, but that ignores another crucial dynamic: whenever hostility between Beijing and New Delhi eases, South Asia briefly breathes a sigh of relief, as evidenced from the period from Kargil in 1999 to Pulwama in 2019. Chinese diplomacy has often acted to prevent escalation between India and Pakistan in particular. Therefore, it's worth exploring the key question of whether a potential Sino-Indian détente can bring stability to South Asia. India and China's relationship has enduringly been defined by mistrust, beginning with the 1962 war that scarred New Delhi's strategic disposition. Since then, every engagement has been marked by uncertainty, territorial disputes, and competing ambitions. Yet the mapping of this bilateral relation reveals a subtle pattern: instances of China-India engagement have historically coincided with a cooling of India-Pakistan tensions. For instance, the visit of Indian Prime Minister Rajiv Gandhi to Beijing in 1988 resurrected India-Pakistan engagement as well. Similarly, Indian Prime Minister Atal Bihari Vajpayee's visit to China in 2003 was followed by the India-Pakistan ceasefire along the Line of Control. Viewed through this lens, the China-India intermittent dialogues were not insignificant, isolated events but instead led to a substantive ripple effect across the South Asian region – very much to the benefit of India-Pakistan relations. Simply put, diplomatic engagement between New Delhi and Beijing often coincides with de-escalation in South Asia. This pattern has acquired renewed significance in the current context. India's outreach to Beijing comes at a moment of growing friction with its Western partners. Despite closer ties with Washington, New Delhi has faced repeated reminders of U.S. unreliability, such as tariffs on Indian goods, and unease in Washington over India's continued purchase of discounted Russian oil, often seen by the U.S. as an effort toward de-dollarization. This has raised questions within the Indian political circles about whether the United States can be trusted – a perennial concern for New Delhi. Apart from these factors, the major underlying trigger has been the diplomatic isolation and lukewarm response from Indian allies after the May 2025 conflict with Pakistan, which has Washington re-evaluating its strategy of relying on India as a counterweight to China. India's hyper-sensationalist media reporting and extensive use of information warfare, along with the absence of any substantial proof of Pakistan's culpability in the Pahalgam attack, has seriously damaged India's credibility on the international stage. More broadly, the recent assertive diplomatic posturing evident from statements by External Affairs Minister S. Jaishankar, and intelligence adventurism abroad, especially in Western states such as Canada and the U.S., and the policy shift from nonalignment to multialignment in an era of conflict-enriched geopolitics, resulted in additional diplomatic mistrust. This uncertainty has now compelled India to hedge its bets. India has realized that an overreliance on Washington would narrow the already closing space of New Delhi's diplomacy, leaving India stranded. So, by moving to normalize ties with Beijing, the Modi government has not only strategically signaled that India has options beyond the U.S. This pivot also comes at an interesting time for India-Pakistan relations, with China being Pakistan's close ally and supporter. India would have noticed Chinese analysts like Victor Gao making assertive remarks in support of Pakistan on multiple international television shows. Meanwhile, during the brief conflict in early May, Chinese-made J-10C fighters armed with PL-15 missiles were successful in striking India's Rafales, thus establishing geopolitical and military leverage in favor of Pakistan – and China. Hence, the upcoming participation of Modi in the SCO summit and a possible meeting with President Xi Jinping not only showcases India's diplomatic isolation but also its ability to readjust as per the geopolitical reality. If New Delhi's strategy reflects a search for political leeway beyond the West, Beijing has its own reasons to listen. China's strategic outlook has always been shaped by its economic aspirations and the need to secure reliable markets. And India, with its huge capital and vast consumer base, is too significant to be disregarded. Even a limited economic engagement with New Delhi could provide Beijing with a strategic advantage. Moreover, even strategically, Beijing has every reason to cool tensions along its western border. The rivalry with the United States over Taiwan and the South China Sea already consumes a lot of its diplomatic and military resources. Easing friction with India would allow China to concentrate on its growth rather than risk being pulled into yet another crisis. Additionally, China's investment in Pakistan through the China-Pakistan Economic Corridor gives it an incentive to play ballast. For China, it is imperative to safeguard its stakes in both Islamabad and New Delhi, and to do so, it must moderate the conflict between them, which can only happen in the case of a normalization of China-India relations. Under this logic, Chinese dialogue with India is a strategic and indispensable tactic of Beijing's broader regional strategy. If Beijing now sees value in moderating between India and Pakistan, it would not be the first time it has played that role. During past India-Pakistan crises, China urged restraint, such as in 1999 during the Kargil conflict, in 2001-02 after the attack on India's Parliament, and more recently after the 2019 Pulwama attack, calling for de-escalation. While Washington often gets credit for meditating in South Asia, especially given President Donald Trump's newfound interest in mediation, even in the case of recent ceasefire negotiations between India and Pakistan, China has always been a parallel stabilizer: quiet, firm, and largely under-recognized but always present. In moments of crisis, Beijing has avoided theatrics and cautiously steered both rivals toward the brakes. This underappreciated dynamic suggests that if India and China move toward a thaw, Beijing will play even more of a stabilizing role in South Asia. If a tentative thaw between Delhi and Beijing does happen, the implications for South Asia would be significant. For Pakistan, the immediate concern would be whether closer China-India coordination weakens Beijing's commitment to Islamabad. But as history has demonstrated, the 'iron brotherhood' would not be abandoned. However, India's reduced two-front anxiety would alter the balance – for the better. New Delhi might demonstrate greater restraint, thus lowering the risk of violent flare-ups. While the success of a China-India detente would not eradicate disputes, it would introduce a mitigating factor. Despite potential benefits, constraints limit the potential for a thaw between China and India, due to unresolved border disputes, water crises, and concerns over CPEC. Rising nationalism on both sides restricts compromises: New Delhi fears backlash if lenient, while Beijing views concessions as weakness. The deep mistrust rooted in competing aspirations and alliances suggests that any rapprochement is tactical, not a major shift. Even so, improving China-India relations could stabilize India-Pakistan dynamics, even if only temporarily. This potential benefit is often overlooked in policy discussions, which tend to assume that India-Pakistan tensions depend solely on Washington's mediation. However, history suggests that warming China-India relations could meaningfully reduce tensions in the region. In the end, South Asian peace might emerge from Beijing rather than Washington.
The Diplomat
4 hours ago
- The Diplomat
Why China's Fear of Failure Will Keep It Behind in the AI Race
As China scrambles to catch up to Nvidia in the AI chip race, the United States must recognize the real reason it's still ahead: not subsidies or sanctions, but a cultural embrace of failure as a stepping stone to innovation. Nvidia just reached a market cap of about $5 trillion, cementing its role as the crown jewel of the AI revolution. Its GPUs power everything from ChatGPT-like models to autonomous vehicles and military applications. But behind Nvidia's dominance is not just superior engineering; it's a culture of risking-taking and learning from setbacks. In contrast, China's approach to innovation is often characterized as scaling existing technologies rather than fostering groundbreaking advancements. Despite massive government investments, China has not yet produced an AI chip that can rival Nvidia's H100 or the newer B200. The gap is not due to a lack of talent or investment, but a deeply cultural aversion to failure. In Chinese education, failure is frequently viewed as a source of shame, a concept known as 'losing face' or mianzi. This cultural norm permeates classrooms, workplaces, and family life, discouraging the risk-taking necessary for true innovation. Take Chinese schools, for example, Ms. Zhang, a high school teacher in Beijing, noted that there is a strong societal expectation that all students work diligently and perform well. Schools often rank students from 1 to 50. The top students sit in the front rows, while those deemed to be underperforming or unmotivated are relegated to the back. This seating arrangement publicly shames students, highlighting their perceived lack of work ethic and care. The embarrassment extends beyond the classroom, as students fear the consequences of their poor performance at home, where their failure could bring additional shame. I also observed this firsthand during my time at Renmin University in Beijing. Students were often too intimidated to challenge their professors or question their statements. Even politely pointing out a mistake could result in public humiliation, as the student was seen as arrogant, disrespectful, and overstepping their role. In this system, professors are treated as near-infallible authorities, with their words regarded as unquestionable fact. This environment stifles critical thinking and discourages intellectual independence. In the workplace, this aversion to failure can manifest in practices that discourage individual recognition. The joint venture between McDonnell Douglas and Shanghai's Aircraft Manufacturing Company illustrated the challenges of applying Western management practices in China. McDonnell Douglas rewarded standout employees with bonuses and 'Employee of the Month' recognition. That approach clashed with Chinese cultural norms, where it is expected that everyone of the same social rank or job title performs equally well. Awarding select individuals for their superior performance is seen as an implicit critique of the others, suggesting they have not performed up to standard. This approach reflects a cultural reluctance to recognize individual merit, which can hinder the growth of a culture of excellence and suppress innovation. In contrast, the United States has fostered a culture that sees failure as a vital component of innovation. From 'show-and-tell' in kindergarten to higher education, American schools encourage students to explore, question, and experiment. By the time they reach university or enter the workforce, they have internalized that mistakes and challenges to the status quo are not sources of shame but opportunities for learning and growth. The United States has long embraced an interdisciplinary approach to education, encouraging the blending of seemingly unrelated ideas often leads to groundbreaking advances. This mindset produced innovations like the iPhone, where Steve Jobs combined a phone, a camera, and a computer into a single device. At the time, it was a bold and unconventional idea, but the willingness to take risks along with the cultural acceptance of failure made Apple's breakthrough possible. China has found success in sectors from solar panels to high-speed rail by refining what's already out there. But true breakthrough innovations like CRISPR, the transistor, or Nvidia's AI chips are born not from incremental steps but from a willingness to question authority, experiment, and most importantly, fail. The United States' real advantage in the AI chip race and across all high-tech fields lies not just in its resources, but in its culture of innovation. To stay ahead, the U.S. must continue to nurture an environment where failure is embraced rather than feared. By protecting this mindset, the United States can remain the global leader in the next breakthrough, just as it has for the past century. True innovation doesn't come from obedience; it comes from the courage to fail.
Japan Today
4 hours ago
- Japan Today
India test-fires nuclear-capable ballistic missile
India's Agni-5 missile, displayed during a rehersal in 2013 for the Republic Day parade in New Delhi India said Wednesday it had successfully test-fired an intermediate-range ballistic missile which, when operational, should be capable of carrying a nuclear warhead to any part of China. The Agni-5 missile was successfully launched in India's eastern Odisha state, with authorities saying it "validated all operational and technical parameters." India and China, the world's two most populous nations, are intense rivals competing for influence across South Asia and relations plummeted in 2020 after a deadly border clash. India is also part of the Quad security alliance with the United States, Australia and Japan, which is seen as a counter to China. India's bitter rival Pakistan has nuclear weapons as well and the two countries came to close to war in May after militants killed 26 people in Indian-administered Kashmir, an attack New Delhi blamed on Islamabad. But Pakistan denied any involvement. Caught in global trade and geopolitical turbulence triggered by U.S. President Donald Trump's tariff war, Delhi and Beijing have moved to mend ties. Last October, Indian Prime Minister Narendra Modi met with Chinese leader Xi Jinping for the first time in five years at a summit in Russia. Modi is expected to make his first visit to China since 2018 later this month to attend the summit of the Shanghai Cooperation Organization (SCO) -- a regional security bloc. Ties between New Delhi and Washington, meanwhile, have been strained by Trump's ultimatum that India end its purchases of Russian oil, a key source of revenue for Moscow as it wages its military offensive in Ukraine. The United States says it will double new import tariffs on India from 25 percent to 50 percent by August 27 if New Delhi does not switch crude suppliers. The Agni-5 is one of a number of indigenously produced short- and medium-range Indian ballistic missiles aimed at boosting its defense posture against Pakistan, as well as China. © 2025 AFP
