China business gets harder for European companies, despite Covid’s end

BEIJING – European businesses in China are finding it harder to operate in the country, even after it has re-opened from Covid, the EU Chamber of Commerce in China found in its latest member survey, released Wednesday.

Mainland China ended its stringent Covid controls in December, and authorities pledged to support more business travel in and out of the country.

But an initial economic rebound has lost steam, while regulatory hurdles remain.

“Zero-Covid has ended, but other headwinds will need to be addressed if China is to regain its attractiveness,” the Chamber’s report said.

Its annual business confidence survey found a large increase in companies saying they missed out on opportunities in mainland China due to restrictions on market access or regulatory barriers.

While the survey noted part of those were due to Covid controls, the outlook remains grim.

There’s “no expectation that the regulatory environment is really going to improve over the next five years,” Jens Eskelund, president of the EU Chamber of Commerce in China, told reporters in a briefing.

Ambiguous rules and regulations remained the top regulatory obstacle for respondents for the seventh year in a row, the report said.

China has increased regulation in the last few years. Some targeted alleged monopolistic practices in the internet technology sector, which Beijing had allowed to develop rapidly with few restrictions. Other new regulation has sought to set parameters for personal data protection, similar to privacy rules in Europe.

However, this year China has made clear its emphasis on ensuring national security and expanded its counter-espionage law. News of raids or probes at three foreign consulting firms in China have also rattled business leaders overseas.

Eskelund said foreign businesses still awaited clarity on the new regulation, as they have with rules released more than five years ago.

“I think we will need to see how this actually pans out in reality,” he said. “We are not aware of a great many companies who felt impacted in concrete terms.”

European business surveyed said their top challenges were by far economic: slowing growth in China and the world. U.S.-China trade tensions ranked third, the report said.

China reported economic data for May that missed expectations and showed a slowdown from the prior month.

The ministry has called 2023 an “Invest in China Year” and local governments have been trying to court foreign money. Premier Li Qiang also met with German businesses this week in his first trip overseas in the role, which he gained this year, state media said.