BEIJING – The European Union Chamber of Commerce in China, in partnership with Roland Berger, released its European Business in China Business Confidence Survey 2024 (BCS). The annual survey shows that despite the re-opening of China’s borders in early 2023, business confidence in the market continued on a downward trend.

Instead of benefitting from the strong economic rebound that many had expected, European firms operating in China found themselves facing more uncertainty. China’s structural issues—including sluggish demand, growing overcapacity, and the continued challenges in the real estate sector—along with market access and regulatory barriers, continued to negatively impact European companies.

A positive finding in the survey is the notable increase in the proportion of respondents reporting market opening in their industry (45%, +9pp y-o-y). However, 68% reported that business became more difficult, the highest percentage on record. In addition:

• 55% of respondents ranked China’s economic slowdown as a top-3 business challenge, a 19-percentage point increase year-on-year (y-o-y);
• 58% missed business opportunities as a result of market access or regulatory barriers;
• 44% are pessimistic about profitability over the next two years, the highest level on record, and the proportion of respondents positive about their growth prospects dropped a staggering 23 percentage points y-o-y.

The strategies companies are employing to adapt to the business environment have the potential to set China into a negative cycle that would add to the country’s economic woes:

• 52% of respondents plan to cut costs, with 26% of them doing so by reducing headcount.
• 13% have already shifted or decided to shift, existing investments out of China (although 21% have indicated they will be on shoring more of their supply chain).
• 42% are considering expanding their operations in China in 2024 – the lowest level on record.

“There are worrying signs that some European companies are either slowing operations or scaling down their ambitions in China as the challenges they face start to outweigh the benefits of being here,” said Jens Eskelund, president of the European Union Chamber of Commerce in China. “While the Chinese Government is frequently signaling its intent to improve the business environment, we now need to see concrete action to restore investor confidence.”

“European companies are confronted by growing uncertainties in China, in large part due to economic volatility and less predictable policy direction,” said Denis Depoux, global managing director of Roland Berger. “While volatility can be managed, the lack of predictability may reduce the appeal of the Chinese market.”