EU businesses are more worried about China's economic slowdown than geopolitical conflicts

Beijing's central business district on June 21

The European Chamber of Commerce in China (EUCCC) has released the results of a survey of European Union (EU) companies operating and doing business in the country. Accordingly, the number of EU companies that continue to consider China among the top three countries to invest in in the future has fallen to the lowest level since the annual report was conducted in 2010.

As rising interest rates and inflation weigh on consumer demand in Europe and the US, companies in China are facing sharp price falls.

The number of EU companies reporting a decline in income from China in 2022 has tripled compared to 2021. In addition, China's importance to the global profits of these companies has declined for the second consecutive year, according to a report by Reuters on June 21.

"The decline in business sentiment has been going on for three years and cannot be reversed overnight," EUCCC commented.

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The EUCCC's findings, based on members' views from February to early March, also revealed a record number of companies lost business opportunities last year due to lack of market access and policy barriers.

President Xi Jinping's increased focus on national security has left many foreign companies uncertain about how to navigate a market where regulations are often vaguely worded.

Foreign direct investment (FDI) into China has fallen sharply since the country lifted its strict Covid-19 prevention policies at the end of last year. The EU-China trade deficit will also continue to widen in 2022, reaching 396 billion euros.

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