Volkswacht Bodensee - Foreign business lobbies warn working in China harder than ever

There was a burst of consumer exuberance after China lifted its strict zero-Covid policies late last year.

But weak consumption, a crisis in the massive property sector and soft demand for China's exports has complicated the recovery.

US firms in China now report "record-low" optimism and are increasingly looking to move investment away from the country, the American Chamber of Commerce (AmCham) Shanghai said.

"2023 was supposed to be the year investor confidence and optimism bounced back after years of Covid disruptions and restrictions," AmCham said in a report released Tuesday.

"According to our 2023 survey of US businesses in China, however, the rebound has not materialized and business sentiment has continued to deteriorate," it added.

A report released the same day by the Chamber of Commerce of the European Union expressed similar concerns.

"European companies' perception of the Chinese market as predictable, reliable and efficient has been steadily eroded," the Chamber -- which represents some 1,700 EU companies based in China -- said.

"For decades, European companies thrived in China," the Chamber's president Jens Eskelund said.

But, after three "turbulent" years, he said, "many have re-evaluated their basic assumptions about the Chinese market".

At a separate media event on Tuesday in Beijing, the European Commission's digital chief said opaque Chinese laws were fuelling concerns among foreign firms in the country after holding talks with Chinese officials about critical areas such as AI and data governance.

Among the concerns Vera Jourova said she had heard about from European businesses in China was the "unpredictability of the decisions and interpretation of the laws by the regulators".

- Rising uncertainty -

Foreign entrepreneurs have long complained about vague and arbitrary regulations in China -- as well as preferential treatment afforded to local companies.

And one in two European companies reported "obstacles" to their activities in China and 62 percent said they missed opportunities.

"What kind of relationship does China want to have with foreign entreprises?" the Chamber asked.

Respondents' optimism about the next five years was the lowest ever recorded in the survey, AmCham Shanghai said, with just 52 percent saying they had an optimistic outlook, down three percentage points from the year before.

Asked to pick the top three challenges to their company, 60 percent of the 325 businesses who responded to the survey chose US-China relations, while the same amount pointed to the economic slowdown.

Four out of 10 were planning to or already in the process of redirecting their investment away from China to other countries, up six percentage points from last year, with Southeast Asia the top alternative destination.

AmCham said two-thirds of respondents under pressure to decouple from the Chinese market had pointed to US policy as the largest push factor, rather than Beijing's.

European businesses also pointed to a revision to China's anti-espionage law, introduced in July, as undermining confidence.

Experts and Western governments have warned the law gives authorities more leeway in implementing already opaque national security legislation.

"But what exactly constitutes a state secret?" asked the Chamber of Commerce in its annual survey.

The findings come as China enacts a series of measures to prop up the sluggish economy.

But despite rising uncertainty, there have been positive moves from both the Chinese and US governments in recent months, AmCham said.

"Increasing communications between Washington and Beijing in recent months was an important step to stabilize the relationship," AmCham chairman Sean Stein and AmCham president Eric Zheng said in a statement.

A series of visits by senior US officials to China this summer, including Commerce Secretary Gina Raimondo, as well as the release last month of the Chinese State Council's 24 measures to promote foreign investment, have all been positive signals, AmCham said.

O.Schlaepfer--VB