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This post was edited by NgTran at 2014-5-29 20:04|
European Firms Are Cooling on China, Survey Shows
European companies doing business in China are finding the market less attractive due to rising labor costs, a slowing economy and lack of adherence to the rule of law, the European Union Chamber of Commerce in China said Thursday.
Other factors hurting the business climate, according to the latest survey of 552 Europe-based companies operating in China, include difficulties attracting and retaining staff, market access barriers and "discretionary enforcement of regulations."
"The economic slowdown is a real game-changer for European companies in China," said Jörg Wuttke, president of the European Chamber at a news conference. "For multinationals, China is still important but not as important as it was a few years ago."
Despite Beijing's promise to enact far-reaching economic reforms, only 53% of the companies polled said they expected to see changes implemented in a meaningful way. "A new sober reality is developing," the report said. "An abiding sense of pessimism for future performance is setting in."
Some European companies appear to be voting with their feet, or at least thinking of doing so. While the world's second-largest economy remains a hugely important market, many said they were scaling back investment plans. Only one in five ranked China as their top destination for new investments, down from a third in last year's survey.
The proportion planning to expand their activities in China over the near term dropped to 57% from 86% a year ago. Companies that have operated in China longer were generally more pessimistic than newcomers.
China's Ministry of Commerce didn't respond to a request for comment.
Few of the problems faced by European companies in China are new, the chamber acknowledged. But the impediments are getting more pronounced and entrenched, it added. "Business in China is already tough, and it is getting tougher," the report said. "European companies are left wondering if the good times in China have already ended."
Better rule of law would be the best way to improve China's future economic performance, surveyed companies said. Laws themselves are generally adequate, many said, but the big shortfall is with enforcement. "European companies are 'looking over the fence' to see what opportunities exist in China's neighbors," the report said.
The results of the poll mirror an American Chamber of Commerce survey published earlier this year, although the decline in confidence was less dramatic among U.S. businesses.
Of American firms polled, 73% said they planned to increase their investment in China over the next year, although that was a big drop from the 84% seen in the previous survey.
U.S. firms as a group are doing slightly better in China. Seventy percent told AmCham they were profitable, compared with 63% of firms in the European survey.
Still, the picture varies between industries. European auto makers were optimistic about their prospects in China, the world's largest car market, where German brands are considered a mark of quality.
But European law firms, which are subject to heavy operating restrictions, were among the most downbeat. Ninety percent said they face discrimination compared with Chinese competitors.
The European Chamber of Commerce has often been more forthright in its criticism of Chinese policy than its American counterpart. Unlike the U.S., Europe doesn't a have a large constituency of politicians critical of China, said Mr. Wuttke, the chamber president. That means business has to fight to get its concerns heard.