BEIJING — Business sentiment among European companies operating in China has plummeted to unprecedented lows, now ranking worse than during the pandemic, driven by concerns over sluggish economic growth and geopolitical instability.
According to the latest findings from the EU Chamber of Commerce’s annual survey, a record 73% of respondents indicated that conditions for conducting business in China have deteriorated over the past year. This figure represents a steep increase for the fourth consecutive year.
The comprehensive report, which has been released annually since 2004, surveyed 503 participants between January and February. The results highlight a significant decline in sentiment across various sectors. Jens Eskelund, president of the chamber, remarked that while companies are facing increased pressure and pessimism, they are still recognizing the advantages of established supply chains in China, necessitating their continued presence in the market.
Despite these entrenched challenges, Eskelund noted that there is no sign of a rebound in business confidence. “We haven’t seen an inflection point yet. A lot of it boils down to uncertainty,” he stated.
Since the pandemic-related lockdowns in 2022 disrupted supply chains, foreign companies have increasingly struggled to navigate the evolving market landscape. Although local brands have stepped up their competitiveness, overall consumer demand remains tepid, exacerbated by a slump in the real estate sector and job market uncertainties.
The cosmetics industry has particularly suffered, reporting a staggering 45% decline in revenues in 2024 compared to the previous year—a rare downturn in what’s otherwise been a decade of growth. Conversely, sectors like aviation and aerospace are among the few that have reported improved conditions for business operations in China.
The dimming economic growth has diminished China’s comparative appeal to businesses exploring global markets.
Only 12% of survey respondents expressed optimism regarding profitability in China over the next two years, the lowest figure on record. Furthermore, an unprecedented low percentage ranked China as a preferred destination for future investments, with just 38% of respondents planning to expand operations in the country within the coming year.
Despite Beijing’s initiatives aimed at enhancing the foreign investment climate, significant hurdles remain. A record 63% of participants reported missing out on business opportunities due to market access limitations and regulatory impediments, with European medical device firms specifically noting discriminatory practices favoring local competitors in public procurement.
This overall pessimism mirrors findings from a U.S. Chamber of Commerce survey that revealed a record number of American companies accelerating plans to relocate their manufacturing or sourcing operations away from China.
Notably, 53% of those surveyed indicated that they would increase investments in China if local market access conditions improved.
Supply chain competition
China’s role in the global supply chain remains strong, primarily due to its ability to provide high-quality components at competitive prices, a fact underscored by Eskelund during discussions with numerous companies over the past three weeks.
Regarding supply chain strategies, over 25% of respondents stated they are increasing onshoring efforts to China to better comply with localization demands and to enhance access to the domestic market. Only 10% are diversifying their supply chains overseas while retaining their operations in China. Additionally, nearly half of those surveyed noted that their Chinese suppliers are shifting their operations to other countries.
In a bid to strengthen bilateral relations amid rising U.S. tariffs, leaders from China and the EU are scheduled to convene for a summit in Beijing in July. Notably, the EU is recognized as China’s second-largest regional trading partner.
