European Firms Question China's Economic Revival Plans

European firms in China doubt the government's ability to boost the economy or carry out proposed reforms, reducing their investment interest. The EU Chamber of Commerce reported that its members face enduring challenges, leading to a decline in foreign direct investments. A significant concern is China's economic slowdown.

European firms operating in China are increasingly skeptical about the Chinese government's ability to boost the faltering economy or deliver on long-promised reforms, a European business lobby group reported on Wednesday. This skepticism is diminishing their willingness to invest in the country.

The European Union Chamber of Commerce in China revealed in its latest Position Paper that many of its 1,700 member companies now believe the challenges they face may be permanent rather than temporary 'growing pains' of an emerging market.

Jens Eskelund, the chamber's president, stated that investors have reached a tipping point, closely scrutinizing their operations in China as doing business there becomes increasingly difficult. He noted that it has become significantly harder to make money in the Chinese market.

According to European Commission data, EU foreign direct investment flows to China fell by 29% in 2023, while the chamber noted that profit margins for around two-thirds of its members in China had dropped to or below the global average.

European businesses are grappling with unfair subsidies to Chinese competitors, a highly politicized business environment, and significant market access and regulatory barriers. The central issue, however, remains China's economic slowdown.

(With inputs from agencies.)