A business group warned Wednesday that foreign businesses are moving investments and Asian headquarters out of China as trust plummets with the extension of an anti-spying law and other issues.
The European Union Chamber of Commerce in China study is one of several signals of rising pessimism despite the governing Communist Party’s efforts to reinvigorate interest in the world’s No. 2 economy after anti-virus regulations ended.
According to the European Chamber, companies are concerned about security regulations, government protection of Chinese rivals, and reform delays. Slowing Chinese economic development and rising prices also strain them.
The European Chamber president, Jens Eskelund, told reporters that China’s business confidence is “pretty much the lowest we have on record” before the report’s release.
Eskelund stated the regulatory climate won’t improve in five years.
President Xi Jinping wants foreign firms to invest and contribute technology to boost economic growth, which fell to 3% last year. However, security restrictions and ambitions to compete with worldwide providers of computer chips, commercial jetliners, and other technologies worry them. Beijing’s subsidies and market restrictions contravene Washington and the EU’s free-trade obligations.
Two-thirds of the 570 firms surveyed by the European Chamber said doing business in China has gotten harder, up from less than half before the outbreak. Three-fifths said the corporate climate is “more political,” up from half last year.
After authorities raided Bain & Co., Capvision, and Mintz Group, companies are on edge. Authorities said corporations must follow the law but have not shown any infractions.
Beijing’s national self-reliance also worries companies. Even if it costs more, Xi’s administration wants manufacturers, hospitals, and others to utilize Chinese suppliers. Foreign firms fear market exclusion.
Last month, the government banned Micron Technology Inc.’s memory chips from critical systems. It claimed Micron had security issues without explanation.
One in 10 European Chamber firms have moved investments out of China. Another 20% are postponing or changing investments. 1 in 5 aviation and aerospace businesses will not invest in China.
Companies worry about market access limitations, pressure to pass up technology, and other issues in China. Since Xi seized office in 2012, the governing party has demanded board seats and direct control over hiring and other decisions from foreign enterprises.
The European Chamber stated: 2 out of 5 Chinese consumers or suppliers surveyed reported investing abroad.
Last month, the British Chamber of Commerce in China said its members were waiting for “greater clarity” on anti-spying, data security, and other standards before investing.
Eskelund said the ruling party’s broad concept of national security—including the economy, food, energy, and politics—is the largest issue.
State secrets are what? Where is politics and business?” Eskelund stated. “Creates uncertainty” about “where we can operate as normal businesses.”
In the European Chamber poll, 43% of firms transferring their Asian headquarters out of China chose Singapore, followed by Malaysia. 9% visited Hong Kong.
Premier Li Qiang, China’s top economic leader, has vowed to improve operating conditions, but firms report minimal improvements.
Eskelund remarked, “Our members are not really convinced that we will see tangible results.