European Companies Expressing Less Optimism Towards China’s Expansive Market Amid Economic Slowdown

China’s Slowing Growth Dampens Foreign Investment Prospects

In a bid to revitalize its slowing economy, China is actively seeking foreign investment. However, a recent survey of more than 500 European companies has revealed that the sluggishness of the Chinese economy is hindering company plans to expand their businesses in the country.

The annual survey conducted by the European Chamber of Commerce in China found that the slowing economy has become the primary concern for respondents. While China remains an attractive investment destination, the survey showed that only 42% of companies are considering expanding their operations in the country this year, the lowest percentage ever recorded.

“The business outlook is the most pessimistic yet, with companies’ expectations for growth and profitability taking a hit, and concerns about competition intensifying,” the Chamber stated in its business confidence survey.

The economic worries are compounded by long-standing complaints about regulations and practices that favor Chinese competitors or are unclear, creating uncertainty for businesses and their employees. Jens Eskelund, the president of the European Chamber, noted that these issues, combined with the weaker economy, are eroding business confidence and impacting investment decisions.

Despite the government’s efforts to boost consumer spending, confidence remains low due to a weak job market. While economic growth exceeded expectations in the first quarter of the year, much of the growth was driven by government spending on infrastructure and investment in factories and equipment.

The survey also highlighted intense price competition in industries like solar power panels and electric cars, leading to overcapacity and squeezed profits for foreign companies. Nearly 40% of companies surveyed are considering moving future investments out of China, with Southeast Asia and Europe emerging as the top alternatives.

As companies reassess their investment plans, the report emphasized the need for meaningful improvements to the business environment in China to retain its allure as a top investment destination. Without such improvements, companies may continue to seek opportunities in other markets perceived to offer more reliability, predictability, and transparency.