Optimism waning for European companies in China

Fewer European companies are optimistic about earning profits in China, as wage surges and an economic slowdown resulted in losses for more of the companies last year, according to survey results issued on Thursday.

Less than one-third of European companies said they are optimistic about their profitability for the next two years, down from 47 percent in 2008, according to a survey issued by the European Chamber of Commerce in China and Roland Berger.

Only 44 percent of the surveyed enterprises reported profit increases in 2012, down from 64 percent a year earlier, while 21 percent said their profits have decreased, the survey said.

Almost half of all European companies that have operated in China for less than five years and half of all small- and mid-sized enterprises said their businesses failed to make a profit last year, the survey showed.

About a third of companies, down from 42 percent in 2012, performed better than the worldwide average, the survey said.

Davide Cucino, president of the EU chamber in China, cited rising labor costs, slowing growth and increased local competition as the main causes of the profit slump.

China's economy has been expanding by 7 to 8 percent in recent years, down from the double-digit growth seen in years previous. GDP growth slide to 7.7 percent last year, the lowest growth in 13 years.

However, only 10 percent of the surveyed companies are considering shifting investments outside China, down from 22 percent in 2012, according to the survey.

More than 80 percent of the surveyed companies are planning to expand their operations, largely to west China, where investment is rapidly boosting growth.