22% of EU firms considering China pull-out

CHINA’S INCREASINGLY difficult regulatory environment and the rising cost of labour has prompted more than one in five European Union firms to consider shifting investments to other countries, a survey by the EU Chamber of Commerce in China showed.

China is of growing importance to European companies – the EU is China’s biggest trading partner and the country’s largest export market.

China accounted for more than a quarter of global revenue for 26 per cent of respondents, compared with 17 per cent in 2009, according to a business confidence survey conducted in February by the Chamber and Roland Berger Strategy Consultants.

However, 22 per cent of 557 respondents said they may move investment to developing economies, including those in southeast Asia and South America, where doing business is easier.

“We are happy to report that European companies are continuing to invest and create jobs in China, but the lack of reform of the regulatory environment is worrying and has a disproportionate impact on foreign business as well as on the domestic private sector,” EU Chamber of Commerce president Davide Cucino told a news conference.

“There are indications from this survey that as reform continues to stall and costs rise, a previously reliable stream of FDI may slow and planned investments may be shifted to other emerging markets,” he said.

Due to market access and regulatory barriers, 48 per cent of European companies report missing out on business opportunities, with 64 per cent of these estimating the value of these missed opportunities to represent between 10 and 50 per cent of revenue.

This particular form of Euroscepticism is a fresh challenge to the Chinese government, which is trying to keep growth on track in the world’s second-largest economy, largely by boosting exports.

Most of the firms – 78 per cent – said they were optimistic about growth in China over the next two years.