China’s unpredictability is ‘toxic’ to its business environment, says EU Chamber

Unpredictability in China at a time when much of the world is moving beyond the Covid pandemic is ‘toxic’ to companies doing business in the country, according to a new report released today by the Chamber of Commerce of the European Union in China

“The only predictable thing about China today is its unpredictability, and that’s toxic to the business environment,” said Bettina Schoen-Behanzin, vice president of the European Union Chamber of Commerce. in China.

“A growing number of European companies are pausing investment in China and reassessing their market positions as they wait to see how long this uncertainty will continue, and many are looking to other destinations for future projects,” Schoen said. -Behanzin.

While most European companies in China recorded positive revenues and were profitable in 2021, doing business has become more difficult for the majority, according to the new publication. Survey of European Business Confidence in China 2022 produced in partnership with Roland Berger.

“China remains crucial for most European companies, both as an outlet for products with a strong competitive advantage and as a powerful industrial production base. It’s too big and too important to shrink, but a holistic and stable framework is needed,” said Denis Depoux, global managing director of Roland Berger who produced the report with the Chamber. “Deteriorating internal and external business conditions, with an additional 13% of survey respondents finding doing business in China more difficult in 2022, even before the resurgence of Covid, stands in contrast to China’s crucial role for them.”

“As the rest of the world returns to a level of pre-pandemic normality and China’s strict Covid-19 policy exacerbates the challenges of doing business, many members of the European Chamber wonder how many eggs they are ready to keep in their Chinese basket. said the House in a news release today.

“In response to growing uncertainty – resulting from both China’s COVID-19 strategy and Russia’s invasion of Ukraine – and to minimize their exposure to potential geopolitical shocks, the operations of the European companies in China are increasingly siloed,” the Chamber said. “Eight times as many respondents reported onshore supply chain projects in China as those considering offshoring.”

Two-thirds of European companies saw their revenues increase in 2021; however, doing business has also become more difficult year over year for 60% of them, according to the survey.

Covid-19 was the top issue faced by businesses in 2021, ranking among the top three challenges for 49%; China’s economic slowdown, one of the top three issues for 24%, ranked second, according to the survey. Half said the business environment has become more politicized in 2021; 42% of companies said regulatory hurdles lead to missed business opportunities.

The European Chamber has over 1,700 members in nine cities: Beijing, Nanjing, Shanghai, Shenyang, Guangzhou, Shenzhen, Chengdu, Chongqing and Tianjin. Members include BNP Paribas, BASF, Ikea, Maersk and Lufthansa.

In the same vein as European companies reporting difficulties in China, the vast majority of American companies in Shanghai are cutting their 2022 revenue forecasts following “zero-Covid” policies that have left much of the business center international of 26 million people locked down in April and May, according to a survey by the American Chamber of Commerce in Shanghai published earlier this month.

Some 93% of respondents lowered their revenue forecasts for the year. A quarter of respondents expect revenue to be more than 20% lower than originally forecast, AmCham Shanghai said. A quarter of consumer and service companies have cut their investment plans, as have 20% of manufacturers, AmCham said. “Only one respondent plans to increase investment in China,” he noted.

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