EU firms have reached a ‘tipping point’ in China

Enough is enough. In a major report, the European Union Chamber of Commerce in China has revealed that EU firms have run out of patience with the Communist Party regime.

A deteriorating business environment has seen “confidence” hit an “all-time low.” Almost two-thirds of the 1,700 foreign firms surveyed admitted being “pessimistic about the future.”

“For a growing number of companies, a tipping point has been reached, with investors now scrutinizing their China operations more closely,” Jens Eskelund, the EU Chamber of Commerce president, said.

“The risks of investing in China are beginning to outweigh the returns, a trend that will only intensify if business concerns are left unaddressed,” he wrote in its annual “position paper.”

It appears we are no closer to an answer.

Jens Eskelund, the EU Chamber of Commerce president in China

Reality check:

• The report released today paints a bleak picture of suppressed frustration.
• Business confidence has evaporated amid limited progress on promised Chinese reforms to “further open up” its markets.
• Many companies are moving “supply chains” out of the world’s second-largest economy or hedging their investment bets.

Delve deeper: “While China still holds significant potential, this situation urgently requires more action from the Chinese Government, not more action plans,” Eskelund stressed.

Big picture: Trade relations between Beijing and Brussels are frosty after the EU slapped tariffs on heavily subsidized Chinese EV exports to the bloc. In retaliation, China targeted European pork, dairy, and brandy imports.

Between the lines: “After another year of mixed messages from the Chinese government, it appears we are no closer to an answer,” Eskelund said in a report containing more than 1,000 recommendations.

China Factor comment: “Promise fatigue” has been festering for at least a decade. Key sectors are still blocked or “saturated” by Chinese companies before foreign firms are even allowed to compete.