European businesses report record-low optimism in China: Survey

Business Standard

5 days ago

Confidence among European businesses operating in China has fallen to a record low, according to the European Union Chamber of Commerce's annual survey released on Wednesday. The survey, based on responses from 503 member companies conducted in January and February, highlights growing concerns even before US-China trade tensions escalated further in April.
Only 29 per cent of respondents said they were confident about growth prospects in China over the next two years, the lowest level since 2013. An equal 29 per cent expressed outright pessimism, the highest in the survey's history. Optimism regarding profitability dropped three percentage points from last year to just 12 per cent, another historic low. In contrast, 49 per cent expressed pessimism—setting a new record.
EU firms urge China to enact promised reforms
The EU Chamber of Commerce urged the Chinese government to fully implement newly announced reforms aimed at improving conditions for foreign businesses.
Jens Eskelund, president of the Chamber, noted that concerns over China's domestic economy and persistent producer-price deflation were weighing heavily on both European and Chinese firms. '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.
Barriers to market access persist
The survey also found that market access and regulatory hurdles remain ongoing challenges. About one-third of respondents said they do not expect significant progress in this area—unchanged from last year's sentiment.
Beijing has promised to maintain an open market for foreign businesses. In February, it approved a new policy framework to attract overseas investment, removing restrictions on foreign manufacturing investments and expanding industries open to foreign firms.
China's slowdown cited as top risk
Of those surveyed, 71 per cent listed China's economic slowdown as one of the top three risks to their operations in the country. This was followed by US-China tensions and 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,' said 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.
Rising EU-China trade friction
The report also noted intensifying trade tensions between the EU and China, with both sides launching multiple trade investigations in recent months. Eskelund highlighted the impact of China's April export controls on critical minerals, which have disrupted production across hundreds of European operations.
'A number of companies in Europe will be running out of some of these minerals and production this week,' Eskelund said.