European firms say ‘Golden Age’ in China is over
Market access and regulatory barriers cost EU businesses €21.3 billion
The “Golden Age” for European companies in China is over, the EU Chamber said as it launched a gloomy report on the business climate in the country, blighted by worries about government support for domestic competitors, sagging profits and flagging growth.
“Almost half our members believe the Golden Age for multinationals is ending,” European Union chamber of commerce in China president Jörg Wuttke told a news briefing, as he delivered the 10th annual document on business conditions in the world’s second-largest economy.
“Market access and regulatory barriers cost member companies €21.3 billion, substantially larger than the GDP of Estonia, ” said Wuttke. A major part of this was missed business opportunities.
Two-thirds of large companies stated that business in China has become more complicated and difficult, and that more companies view state-owned enterprises as their main competitors.
“China has plucked the low-hanging fruit over the last 20 years . . . I agree with Chinese leaders when saying there is a lower growth trajectory, and now to change the economy is a far harder task. A more modest outlook is a challenge for our members because China matters to our members. Companies are deeply embedded here,” said Wuttke.
He said that companies, both European and Chinese, were holding back on investment because of lower growth. He conceded that different sectors had different experiences. The car sector for example was very upbeat while others such as energy was not so upbeat.
Last November’s plenum of the Communist Party, which heralded swingeing economic reforms, was a positive step, but only 45 per cent of European companies believe Third Plenum reforms will be good for their companies.
Growth expectations for companies are at their lowest levels since the peak of the financial crisis, stated the report, drawing on responses from 552 firms.
“The economic slowdown is a real game-changer, but we suffer the same headwinds as the Chinese companies. That triggers more modest expectations . . . as companies react to a slower economic environment,” said Wuttke.
“It’s no major surprise if you’re experiencing growth of more than 10 per cent, that when it slows down you feel that things are getting more complicated,” said Wuttke.
The positive effects of entering the World Trade Organisation were diminishing “and you can only enter WTO once. Also we experienced the very unique China demographic sweet-spot where, because of the one-child policy, you had very few old people and many young people, but are now entering a period where China will have one of the fastest ageing societies in Asia, ” he said.
The problems were not just economic.
“Also interesting is the new topic of air pollution, which has given new challenges for companies attracting talents and retaining talents. Sixty-eight per cent have experienced problems attracting talent and 64 per cent retaining talent,” said Wuttke.