Beijing – The European Union Chamber of Commerce in China, in cooperation with Roland Berger, today released its European Business in China Business Confidence Survey 2020 (BCS). At a time when China-based European companies find themselves navigating in the dark due to the global COVID-19 pandemic, the results of the BCS offer the Chinese Government areas to clearly focus their reform efforts in order to bring about quicker economic recovery and restore business sentiment.

Many of the initial findings of the survey, conducted in February 2020, painted an outlook that no longer accurately represent the views of the vast majority of member companies that have endured a tumultuous first half of the year. However, financial reporting for 2019 still showed significant downward trends. This is seen especially in the logistics, chemicals and petroleum, construction and automotive industries, which have the highest share of respondents reporting negative growth. Additionally, China’s limited and selective opening-up agenda only saw modest progress, with reforms inching forward.

  • In 2019, 41% of companies reported at least some market opening. However, most advances were related to the fixing of minor issues, rather than the deep and substantial reforms needed to create a truly open, fair and competitive playing field.
  • Almost half of respondents continue to face market access barriers: 15% report facing mainly direct obstacles, like the negative lists; twice as many report indirect hurdles such as opaque licensing procedures and other complicated administrative approvals.
  • Doing business in China has become more difficult over the past year for 49% of members, a four-percentage point decrease from 2019 – a marginal improvement.

It is concerning that half of BCS respondents believe state-owned enterprises (SOEs) will gain opportunities at the expense of the private sector in 2020, which is up seven percentage points on the previous year. The COVID-19 outbreak looks likely to further exacerbate this problem with the government now turning to SOEs as a source of stability in uncertain times.

Insufficient liberalisation of the Chinese market has seen China move towards a ‘one economy, two systems’ model: on one side, market forces are becoming more decisive and modern regulatory mechanisms look increasingly international on the other, critical sectors of the economy are dominated by state-owned national champions, with private enterprises being stifled or forced out of the market entirely.

“China now has the strength and experience to become a leading force in a global recovery, but this brings with it a significant responsibility,” said Charlotte Roule, vice president of the European Chamber. “Domestic market reforms have never been more necessary, and collaboration with the global community is urgently needed to upgrade and strengthen the rules-based order, guided by the principles of reciprocity.”

“Despite the difficult global environment and uncertainties caused by the COVID-19 pandemic, European companies overall remain strongly committed to China, which remains a top three investment destination for 63% of respondents,” said Denis Depoux, Global Managing Director of Roland Berger. “European companies are increasingly in China for China, both to meet growing domestic demand and to tap into its innovative ecosystem.”

About the European Union Chamber of Commerce in China

The European Union Chamber of Commerce in China (European Chamber) was founded in 2000 by 51 member companies that shared a goal of establishing a common voice for the various business sectors of the European Union and European businesses operating in China. It is a members-driven, non-profit, fee-based organisation with a core structure of 31 working groups and fora representing European business in China. The European Chamber is recognised by the European Commission and the Chinese authorities as the official voice of European business in China.

About Roland Berger

Roland Berger is an independent company founded in 1967. Roland Berger remains the only leading global consultancy firm with non-Anglo-Saxon roots. We are German by origin, European by nature and global by ambition, including a strong footprint in Asia. Our entrepreneurial spirit has shaped our growth and fuelled our outstanding achievements since the early days of the firm. In short, being a game changer is in our DNA. With over 50 years of continuous growth behind us and 2,400 employees working in 35 countries, we are one of the leading players in global top-management consulting and have successful operations in all major international markets.

Download the report here.