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2022-09-21 | All chapters

European Chamber Advocates for Beijing’s Return to Reform Agenda

Beijing, 21st September 2022 – The European Union Chamber of Commerce in China today released its European Business in China Position Paper 2022/2023 (Position Paper), advocating for the Chinese Government to apply its proven toolbox of pragmatic reforms in the face of economic headwinds and rising geopolitical tensions.

While in the past Beijing’s reform agenda helped to ensure stability, propel economic growth and facilitate huge inflows of foreign direct investment, now ideology is trumping the economy.

In 2020, when China rebounded quickly from the pandemic relative to the rest of the world, the country came to be viewed as a safe haven for investment. However, adherence to an inflexible COVID-19 policy has led to unprecedented disruptions to business and exacerbated pre-existing challenges. Factors such as favouritism towards state-owned enterprises and increased politicisation of business have further eroded China’s standing as an investment destination. Companies are increasingly viewing the country as less predictable, reliable and efficient, and with geopolitical tensions on the rise, its future is less certain.

Inbound investment flows from Europe already indicate a changing trend. Over the past four years, the bulk of European FDI into China has been contributed by just a handful of large companies, while the rest have put their China operations in wait-and-see mode as they evaluate alternative markets that can provide greater certainty.

The European Chamber believes that comprehensive market reforms would be the most effective way for China to realise its economic potential and quickly rebuild investor confidence. However, for China to undertake necessary reforms, it is vital that political space be given to policymakers to ‘make mistakes’, discuss ideas and ultimately change course – something that was previously a characteristic of Chinese policymaking.

Despite the heightened difficulties facing European companies in China, they are committed to staying and improving the business environment, as illustrated by the 967 constructive recommendations put forward in the Position Paper 2022/2023. As the European Chamber’s most important publication and the cornerstone of its annual advocacy plan, the Position Paper was compiled by its 35 working groups and sub-working groups over a nine-month period.

“European companies are still eager to contribute to China’s economic development, but investment into the country is unlikely to increase while China keeps its doors closed and companies perceive political, economic and reputational risks to be mounting,” said Jörg Wuttke, president of the European Union Chamber of Commerce in China. “Companies are also crying out for transparency in the business environment, as they must now align their China operations with both corporate pledges and new supply-chain legislation in the EU and the United States.”

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Xinhe Fan