The results of a survey published by the EU Chamber of Commerce in China showed that as China's economic growth slows and overcapacity pressures increase, it becomes increasingly difficult for European companies operating in the country to make money. In addition, there were reports of delays in the payment of salaries. The latest survey was conducted among 529 respondents between mid-January and early February.
China's economic growth has slowed in recent years amid geopolitical tensions, as well as the crisis in the real estate sector, which is closely linked to the finances of local governments.
The survey found that only 30% of respondents said their profit margins were higher in China than their company's worldwide average. The last value is the lowest in 8 years. This was the result of the collapse of the Chinese stock market in the summer of 2015, as well as the slowdown in the real estate market.
“Our members saw to some extent that their ability to grow and make profit in the Chinese market — [the] correlation with the GDP figure is becoming weaker,” EU Chamber President Jens Eskelund said.
China's focus on manufacturing, combined with modest domestic demand, has led to growing global concerns that overproduction will lead to lower profit margins. More than 33% said that their industry had an excess of production capacity in 2023, and another 10% expect this to happen in the near future. More than 70% of respondents said that excess production capacity in their industry led to lower prices.
Overall, the latest survey showed that historically a large number of respondents said conditions were getting worse:
a record high said they were skeptical about their growth potential in China in the next two years
a record high of respondents expect competitive pressure to intensify
a record share doubt their profitability in China
a record high plan to cut costs this year
a record number of respondents said they missed opportunities in China due to regulatory barriers, the size of which was equal to over half their annual revenue
a record low in expectations that regulatory obstacles will decrease