EU Firms Grow Pessimistic About China's Market Amid Economic Downturn

The economic landscape in China presents challenges for European companies, with many expressing a decline in confidence and scaling back expansion plans, as reported by the European Chamber of Commerce in China. In a recent survey, the proportion of businesses considering growth within the Chinese market dropped to a record low of 42%. This pessimism stems from a combination of factors, including increased competition, regulatory issues that are perceived to advantage local firms, and a general economic slowdown that has weakened consumer spending and job markets.

Despite the government's efforts to stimulate consumer spending and attract foreign investment, European companies remain wary. Almost 60% of the surveyed companies plan to maintain their current level of investment, yet this reflects a decrease from previous years. Companies have also reported problems such as delayed payments and are grappling with overcapacity in sectors like civil engineering, construction, and automotive, which has led to price reductions.

The survey has further outlined a somber outlook on profitability and growth expectations, with only 30% of respondents reporting higher profit margins in China compared to their global averages—an eight-year low. The complex business environment is compounded by concerns over unpredictable legislation and regulatory requirements, with only a small fraction of the respondents optimistic about a reduction in regulatory hurdles. The current climate indicates that it may take considerable time for confidence in China as a top investment destination to be restored.