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Is European investor confidence in China on the wane?

‘Only thing predictable about China today is its unpredictability, which is poisonous for the business environment’

The latest report from the European Union Chamber of Commerce in China states that many of its members are considering shifting their investments out of the country.

The European Business in China: Business Confidence Survey (BCS) 2022 states that while companies remain overall committed to the country, the situation—particularly around Covid restrictions—has ‘given many pause for thought’. The current uncertainty, its authors wrote, could lead to some exiting the market.

It wrote: “The flash survey shows that 23% of respondents are now considering shifting current or planned investments out of China as a result of its more stringent Covid-19 restrictions, which is more than double the number recorded in the BCS 2022 (11%), and the highest proportion in a decade. Furthermore, 77% report that the measures have decreased China’s attractiveness as a future investment destination.”

It added: “The war in Ukraine has also hit investor confidence, with 7% now considering moving current or planned investments out of China as a result and 33% viewing the market as having become less attractive as a future investment destination due to geopolitical tensions garnering more attention in boardrooms.”

The EU Chamber of Commerce found that two-thirds of European countries reported revenue increases last year, up 24 percentage points from 2020. But 60% of respondents found that doing business in China became more difficult in the same period, up 13 percentage points, due to internal and external challenges.

After Covid, the report’s authors found other issues being reported in the market.

They wrote: “The ramifications on companies’ workforces have also been significant. Facing a wealth of ever-changing visa and work permit procedures, and extreme limitations on travel in and out of China, 58% of companies (+9pp y-o-y) reported struggling to attract top international and domestic talent, and 42% (+9pp y-o-y) reported struggling to retain the talent they have. An employee exodus is underway, as sought-after talent look for new opportunities elsewhere due to the uncertainty of living and working in China.”

Bettina Schoen-Behanzin, vice president of the European Union Chamber of Commerce in China, said: “The only thing predictable about China today is its unpredictability, and that is poisonous for the business environment. Increasing numbers of European businesses are putting China investments on hold and re-evaluating their positions in the market as they wait to see how long this uncertainty will continue, and many are looking towards other destinations for future projects.”

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