EU Firms Ponder China Pull-out
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Nearly a quarter of all European companies operating in China are considering a switch of their investments away from the country, claimed a survey by the European Union Chamber of Commerce on Tuesday, as higher labour costs and an increasingly difficult regulatory environment continue to weigh heavily on companies’ profit margins.
According to existing data from the Chinese Ministry of Commerce, foreign direct investment from the EU has already slumped in the first four months of 2012 – by 27.9 percent compared to the same period last year.
Nearly a quarter of all European companies operating in China are considering a switch of their investments away from the country, claimed a survey by the European Union Chamber of Commerce on Tuesday, as higher labour costs and an increasingly difficult regulatory environment continue to weigh heavily on companies’ profit margins.
According to existing data from the Chinese Ministry of Commerce, foreign direct investment from the EU has already slumped in the first four months of 2012 – by 27.9 percent compared to the same period last year.
The survey by the EU Chamber of Commerce can thus be seen as further evidence to this data, with 22 percent of respondents expressing an inclination towards leaving China for other markets.
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[quote]“Companies feel as if they missed business opportunities, and if this continues, they might consider to shift their business operations outside of China,” said the EU Chamber of Commerce’s president Davide Cucino to the Associated Press. [/quote]If he were a Chinese official, “I would think this sounds alarming,” Cuciono added.
The EU Chamber of Commerce took the opportunity to urge the Chinese government for greater regulatory reforms.
[quote]”A previously reliable stream of FDI may slow and planned investments may be shifted to other emerging markets if reform continues to stall and costs rise,” warned Cucion, as cited by the China Daily.[/quote]According to the survey results, 48 percent of European companies felt regulatory barriers were harming business opportunities in China, and that the regulatory environment was “discriminatory against foreign companies.”
Furthermore, more than 60 percent listed the slowing global economy and rising labour costs in China as major concerns for their businesses. The average annual salary of workers in private businesses in the Chinese cities has risen by 12.3 percent over the last year, said the Chinese National Bureau of Statistics.
Nevertheless, many companies still recognise China’s important role as a driver of global business. About 74 percent of the surveyed companies said that China was now an important part of their overall global strategy, while 78 percent of the firms claimed to be optimistic about China’s economic growth over the next two years.
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The EU is China’s largest trading partner, with more than $533 billion in trade occurring between the two parties last year. According to the European Commission’s website, “China is the single most important challenge for EU trade policy,” with the EU keen to “ensure that China trades fairly, respects intellectual property rights and meet its WTO obligations.”
