Environment for Foreign and Chinese enterprises is in it most precarious point for years due to China’s harsh no-COVID policies and the government’s “introspection” since the start of the pandemic, the European Chamber of Commerce in China warned in a new article published today. Wednesday.
“Although Europe and China are already at opposite ends of a common continent, they appear to be growing further apart,” EUCCC president Jörg Wuttke wrote in the group’s annual position paper. “European companies still want to contribute to China’s economic development, but investment in the country is not likely to increase while China is closed and companies perceive political and economic risks economy and prestige are increasing.”
The council, which represents 1,800 member companies operating in China, wrote that five main factors contribute to China’s worsening business environment. The first is that Chinese government policymaking has become more “advanced” and less predictable as reforms to China’s state-owned enterprises have stalled.
The government also cited zero COVID, including frequent lockdowns and strict border restrictions, as well as a lack of people-to-people exchanges between Europe and China, as reasons for Europe’s reduced investment. invest in China. The report said that in 2020, EU investment in China decreased by 11.8% compared to 2019.
“In the past, China has faced these challenges with the same kind of pragmatism that has fueled so much of its development for decades,” the report said. However, the report adds, the scale of China’s economic problems amid zero COVID has become unpredictable. Plus, it said, the Chinese government appears to be undergoing a reactionary change as it becomes increasingly closed.
“China’s departure from the rest of the world … shows that, for now, ideology is dominant in the economy,” the newspaper said.
The council also said that companies are being affected by China’s “increasingly politicized” atmosphere on issues such as China’s alleged human rights abuses in Xinjiang and political persecution. of Beijing in Hong Kong. Companies report that supply chains in China have also become less reliable amid the complications related to the pandemic and New law in the US and Europe.
Finally, European companies report that they are looking at the risk that exists when doing business in China, a possibility that was made clearer after Russia’s invasion of Ukraine and the possibility of parallels with the relationship between the two countries. Beijing’s relationship with Taiwan. A third of European companies in China say Russia’s war in Ukraine makes China a “less attractive investment destination” because it makes them seriously consider the possibility that Beijing could invade Taiwan, according to an April survey by the agency.
In Wednesday’s report, the chamber made 967 recommendations to the Chinese government aimed at helping China once again become an attractive destination for foreign businesses. Most importantly, China needs to open up its economy to the rest of the world and loosen the ropes for the private sector, according to the report.
“Focusing on comprehensive reform and opening up will be the most effective way for China to quickly rebuild investor confidence,” the report said.
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