According to the Chinese government, the risks of investing in China outweigh the benefits. Position on European business in China 2024/2025.
The president of the EU Chamber of Commerce in China, Jens Eskelund, said China’s status as the “undisputed leader” of FDI is declining, while expressing “concern that we are now at a tipping point.”
The main obstacles facing foreign companies today are not necessarily different from a decade ago. Market access and regulatory barriers have been common complaints since before the pandemic.
However, at the time, China’s rapid economic growth meant that the benefits outweighed the drawbacks. This made China, with its established infrastructure and large supply of cheap labour, well-positioned to attract FDI.
In the wake of the pandemic, sluggish consumption has caused the country’s growth to lag. The environment for foreign companies has also been uncertain at times. Raids, strict rules on data handling and tough anti-espionage laws that have led to the jailing of foreign workers have made the investment environment more unpredictable.
The emergence of export control policies affecting the microchip and advanced computer sectors in China is also expected to have “a significant impact on a substantial share of EU companies operating in China.” Nearly 25% of respondents to the European Chambers Business Confidence Survey 2024 expect their operations to be affected, while 30% are unsure of the potential impact on their business.
China is also accused of encouraging overcapacity, where output exceeds demand, leading to artificially low prices (this is especially true for the EV sector). If investment in the manufacturing sector continues, coupled with low domestic demand, this will lead to higher exports and more trade friction, Eskelund said. 42% of the chamber’s members claim to be affected by this overcapacity problem.
He urged government officials to pursue a more balanced approach between supply and demand and focus on policies that boost domestic consumption.
“Post-COVID, China is no longer the ‘undisputed leader’ in attracting FDI” was originally created and published by Investment Monitor, a brand of GlobalData.
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