- ORIGINAL NEWS
European companies in China are under pressure from slower growth, overcapacity
- SUMMARY
European companies operating in China are facing a challenging business environment as the country’s economic growth slows and competition intensifies.
According to a survey conducted by the EU Chamber of Commerce in China, European businesses are finding it increasingly difficult to make profits.
In Shanghai, businesses have reported delays in payments, indicating the growing difficulty in enforcing contracts.
China’s decelerating growth, exacerbated by the real estate sector slump, has impacted profitability.
Only 30% of survey respondents reported higher profit margins in China compared to their global average, an eight-year low.
The survey also highlighted concerns about overcapacity, with over 40% of respondents observing it in their industries.
This overproduction, particularly in construction and automotive sectors, is leading to declining prices.
Despite government efforts to attract foreign investment, European companies remain concerned about the regulatory environment and the impact of regulatory barriers on their operations.
Record numbers of respondents expressed skepticism about future growth potential, expected increased competition, and planned cost-cutting measures.
In an attempt to address these concerns, Beijing has introduced a visa-free policy for select EU countries and extended tax exemption policies.
However, the EU Chamber believes more needs to be done to create a more favorable environment for foreign companies.
The survey findings suggest that European companies are beginning to reassess their investment strategies and operations in China due to the persistent challenges they face.
- NEWS SENTIMENT CHECK
- Overall sentiment:
negative
Positive
“EU Chamber President Jens Eskelund noted how Beijing’s recent visa-free policy for several EU countries has allowed executives the flexibility to plan China trips one week in advance, instead of two to three months previously”
“Cosmetics and food and beverage companies have benefited from China’s recent efforts to open its market”
Negative
“European companies in China are finding it harder to make money in the country as growth slows and overcapacity pressures increase”
“In the metropolis of Shanghai, business members even reported delays in getting paid as it became more difficult to enforce contracts versus the prior year”