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2019-05-20 | All chapters

European Chamber report calls for urgent China reforms amid increasing global challenges

Beijing, 20th May 2019 – The European Union Chamber of Commerce in China, in cooperation with Roland Berger, today released its European Business in China Business Confidence Survey 2019. The report raises significant concerns, with issues like the Chinese economic slowdown and the US-China Trade War posing increasingly difficult challenges. This makes the removal of remaining market access barriers, regulatory burdens and unequal enforcement, along with the remnants of China’s planned economy, all the more necessary:

  • Optimism on growth over the next two years dropped from 62% in 2018 to 45% in 2019.
  • 47% of respondents expect the number of regulatory obstacles to increase in the next five years, and 25% expect the number will stay the same.
  • About half of respondents expect it will take five years to see competitive neutrality realised, while a third never expect it to be realised.
  • 20% of respondents felt compelled to transfer technology as a condition for market access, nearly two thirds of which occurred over the last two years, and a quarter of which were taking place at the time the survey was being conducted.

As the Chinese economy settles into more mature and stable development, and supply-side reforms continue to be pursued, China needs more than ever to create a business environment with mechanisms to deal with the consequences of slower growth and bolster a functioning market economy. This means deploying stronger tools like better bankruptcy rules alongside predictable legislative processes, while providing sufficient lead-times for regulatory change.

Creating the open and fair market that European companies expect of China would also remove any justification for the ongoing US-China Trade War. European companies share many of the US’ concerns, but strongly oppose the blunt use of tariffs, which have impacted US-bound exports of 25% of survey respondents. While few companies are yet making significant changes to their China strategy, concerns that tensions will escalate saw the trade war ranked fourth on the list of concerns over future business, outranked only by the Chinese and global economic slowdowns and rising labour costs. 

Despite the mounting pressure of such challenges, European companies continue to see solid revenue growth and 62% of respondents view China as a top three destination for present and future investment. They are increasingly in China, for China, both to access local customers and for exposure to pioneering private Chinese firms that for a second year in a row were viewed by a majority of respondents as equally or more innovative than their European counterparts. 

“China remains a critical market for European companies, dispelling the notion of economic decoupling,” said Mats Harborn, president of the European Union Chamber of Commerce in China. “However, the presence of voices calling for such steps makes it all the more urgent that Chinese policy-makers quickly put in place an open, fair, predictable and well-regulated market.”

“The resilience of European businesses’ commitment to the market in spite of the many challenges here shows the importance of China in many corporate strategies,” said Roland Berger Head of Asia Denis Depoux. “It’s no longer just about being close to customers, it is also about access and exposure to the many cutting-edge innovations coming from Chinese entrepreneurs; those who are not here run the risk of falling behind.”

Please click here to download the survey report.

 

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 fueled our outstanding achievements since the early days of the firm. In short, being a game changer is in our DNA. With nearly 50 years of continuous growth behind us and 2,400 employees working in 34 countries, we are one of the leading players in global top-management consulting and have successful operations in all major international markets.

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Yichi Zhang