The economic situation in China lets European companies look pessimistic into the future. A bitter price war presses the profits, the investments are falling to a record low.
According to a survey, the mood among European companies in China is at a low point. Only 29 percent of companies are optimistic about their growth prospects in the People’s Republic for the next two years.
This is shown by the business climate issue of the European Union Chamber of Commerce in China, and the advocacy group has almost 1,700 members. This has another three percentage points in comparison to the previous year.
The days of high profits are history
The US tariffs, but also developments in the EU, contributed to uncertainty, said Chamber President Jens Eskelund in Beijing. “This inconsistency, which harms the business so much, makes it difficult to stay optimistic.” China had made the planning and reliability of the market attractive, and companies earned good money there. “But it seems that the days of high profits and filling bank accounts with little effort are over,” says Eskelund.
Of the 503 companies involved in the survey, most of the people are concerned about the economic situation of China. There the demand remains weak, also as a result of the crisis in the real estate sector important for economic output. Due to the crisis on the real estate market, consumers tend to save and consume less.
In addition, China’s companies become stronger competition and in many industries there is a bitter price war that presses the profits. According to the chamber, Beijing’s “frequent and opaque” changes to regulations are further unsettled. For some companies, a “politicization” of its industry also makes business difficult.
More threatening Production stop in Europe
Since the EU Chamber of Commerce asked its members between January and February, the escalation of the trade dispute between the USA and China has not yet been the subject of the investigation.
In the Chinese export controls on rare earths and magnets, which China introduced in April in the course of the trade dispute with the USA, Eskel and sees a big problem. “This has real, immediate and profound effects on many European companies.”
This week, companies in Europe whose stocks were running out could threaten to stop and cause high costs. China does not process the complicated requests for exporting the important raw materials quickly enough, said Eskelund. According to him, this proves that Europe must reduce its risk of dependency on China.
Investments flow to Europe
The result of the difficult situation for EU companies in China is that not even every four of ten companies want to invest there this year, as the survey shows – a record low. In addition, around half plans cost reductions, according to which the chamber means job cuts in many cases.
Instead, the investments flow to Europe instead. More companies also adapt their supply chains to protection against geopolitical risks. Many locate their business and produce in China for China. Other companies shift their supply chains in parts to Europe or Southeast Asia.
