BEIJING (dpa-AFX) – With the downturn caused by the corona crisis and the US trade war, European companies in China are heading into an uncertain future. While operations have largely returned to normal as China controls the outbreak of Covid-19 lung disease, they “grope in the dark,” EU Chamber of Commerce Vice President Charlotte Roule said in Beijing on Wednesday when presenting the annual survey on the business climate in China.
The uncertainty is as great “as not seen in generations”. “Supply chains are broken, demand is falling, and the outlook is bleak,” said Roule. In addition, the government is relying in the crisis primarily on Chinese state-owned companies, which are already on the rise even more than before and have displaced foreign and private companies.
China’s market is moving in the direction of “one economy, two systems model,” the vice president told journalists, speaking of an “alarming trend.” On the one hand there is a more open, fair and well-regulated system – on the other hand there are areas in which state-owned companies take over more shares at “alarming speed”.
EU companies are most concerned about the economic downturn. China suffered a 6.8 percent slump in growth in the first quarter. Second in the survey is the two-year trade war between the United States and China.
European companies are also experiencing headaches from the slowdown in the global economy, rising labor costs and ambiguous regulations in China. The growing competitive pressure from private Chinese companies or market players who do not follow the usual rules were also mentioned.
After the normalization of operations, not only the disruption of supply chains but also travel restrictions continue to create problems because experts could hardly be brought to China. For example, China is currently not issuing normal entry permits for foreigners for fear of the virus being introduced.
From the perspective of the Association of German Machine and Plant Manufacturers (VDMA), on the other hand, the situation for German machine builders in China is normalizing, as a recent survey suggests. “In the meantime, 30 percent of the almost 140 companies that took part in the survey assume that they will reach their growth target for 2020,” said the association. Among other things, the confidence is related to the unexpectedly rapid recovery of the Chinese domestic market and the state economic stimulus. However, a vast majority of respondents (80 percent) indicated that the entry ban to China was affecting their business. Foreign specialists were urgently needed on site.
EU companies hope that the targeted investment protection agreement between Europe and China will open up the market more, less discrimination on the Chinese market and more transparent approval and licensing processes. Despite the Corona crisis and the cancellation of the EU-China summit in Leipzig in September, negotiations on video switching continue, as Roule reported.
“We very much want a significant investment agreement,” said Roule. But if that doesn’t work, it would be better not to have one. There is hope, even if it will be quite a challenge to conclude the agreement by the end of the year. However, it would be better to wait longer to reach an effective agreement.
However, the previous day in Brussels, Josep Borrel, the EU foreign policy chief, had been disappointed with the progress so far. He accused China of a lack of will to agree and a breach of agreements – particularly in the areas of market access, reciprocity and uniform framework conditions.
“In cooperation with the member states, the EU Commission is rightly putting considerably more pressure on Beijing to open the market faster,” said Joachim Lang, the managing director of the Federation of German Industries (BDI). “The market entry barriers for foreign companies are still high in China.”
The business climate survey had already been carried out in February, but the Chamber of Commerce experts said that the conclusions had been adapted to the rapid development of the crisis through further surveys of companies. Some trends, especially the strengthening of state-owned companies, have become even worse, said Roule.
The following surveys by the German, Italian, Austrian and French chambers of commerce in China in March would also have shown that two-thirds to three-quarters of the member companies expect a drop in revenues of more than ten percent this year as a result of Covid-19. DP / yeah