Foreign companies in China are reaching a “tipping point” on investing in the world’s second-largest economy as market access barriers, low growth and fierce competition cloud the outlook, according to the EU chamber of commerce in the country.
European companies complain that operating in China is becoming tougher because of a growing web of ill-defined data, cyber security and anti-espionage laws while a weak domestic economy means lower profits.
“For some companies, a tipping point has been met,” said Jens Eskelund, president of the EU Chamber of Commerce in China, which released its annual position paper on Wednesday.
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“Companies are beginning to conclude that, considering supply chain risks, considering anticipated lower profits in China, considering the continued barriers… that maybe other markets are becoming more competitive, more attractive,” Eskelund said.
China’s policymakers are grappling with a two-speed economy in which a property market slowdown has undermined domestic demand and created deflationary pressures, while exports have risen, helped by cut- throat competition among manufacturers.
Foreign businesses have long complained about barriers to market access in China, particularly in government procurement procedures, but in the past rapid economic growth encouraged them to continue investing.
Beijing has set a 5 per cent target for real GDP growth this year, still high for a large economy, with state banks supporting investment in high-tech industries.
But many foreign investors worry they are not seeing the benefits of this growth, with 70 per cent of respondents to a chamber survey saying overcapacity in their industries had driven down prices. About 44 per cent of respondents were also pessimistic about their likely profitability over the next two years, a record high.
Source: Financial Times
