51% of EU firms in China plan to expand business
Over half of European companies in China achieved higher sales last year, but competition from Chinese firms looms, according to an annual business confidence survey.
The survey, conducted by the European Union (EU) Chamber of Commerce in China and Munich-based consultancy Roland Berger between February-March 2017, found that the revenue and earnings of respondents before interest and taxes improved in 2016.
The business group attributed the better results to the financial stimulus that Chinese authorities injected during the first half of 2016, as well as rising demand in the world's second-largest economy and cost control measures.
China's economy showed signs of recovering and stabilizing last year, and began 2017 with a higher-than-expected first-quarter GDP growth of 6.9 percent.
The economy could be more vibrant if China continues reforming and more quickly reaches a resolution in negotiations with the EU on a Comprehensive Agreement on Investment (CAI), Mats Harborn, president of the business group, told a press conference on Wednesday in Beijing.
The group expects negotiations to last 12 months.
The survey results were disclosed a day ahead of the 19th bilateral China-EU summit, which is set to take place on Thursday in Brussels.
Harborn said they hope CAI discussions will top the summit's agenda.
A successfully negotiated CAI with a strong open market component is also "the key to [improved] bilateral trade and investment," Harborn said on Wednesday.
In 2016, Chinese investment in the EU rose 77 percent to more than 35 billion euros ($39 billion), according to a study released by Berlin-based Mercator Institute for China Studies and the Rhodium Group in January, more than four times the amount than in the opposite direction.
"EU companies continue to be attracted to China, and they will get more opportunities as the country promotes high-end manufacturing," Bai Ming, a research fellow at the Chinese Academy of International Trade and Economic Cooperation, told the Global Times Wednesday.
Fifty-one percent of those who responded to the survey said they plan to expand their businesses in China this year, up 4 percentage points from 2016.
During the first four months of 2017, EU investors set up 619 new companies in China, an increase of 11.5 percent from the previous year, investing $3.57 billion, up 2.1 percent from a year earlier, data from the Ministry of Commerce showed.
Some skepticism
Despite the growing opportunities, many European companies still think it is difficult to do business in China, calling for better market access and equal treatment, according to the survey.
For instance, 61 percent of respondents believe that China's environmental regulations are strictly enforced against foreign companies. And 40 percent think regulatory barriers in China will increase in the next five years.
"The previous regulations were too lenient, and some foreign companies even received preferential treatment. The market is becoming more transparent and fair for firms, whether domestic or foreign, but some EU companies cannot get used to the changes and still complain," said Bai.
In January, the central government released the No.5 document to improve the business environment for foreign companies.
Chinese President Xi Jinping pledged in Davos earlier this year that the country would keep its door open to foreign investors, aiming to import $8 trillion in goods and attracting $600 billion in foreign investments in the next five years.
In 2015, China reduced the number of industries restricted to domestic firms to 15 from 43.
"China has begun to woo high-tech foreign companies, but it takes time to generate results especially at a time when EU and US authorities are trying to bring back high-end manufacturing to their own markets," Wang Danqing, a partner at the Beijing-based ACME consultancy, told the Global Times Wednesday.
As China promotes innovation-focused industries, domestic companies are expected to narrow the gap with their European counterparts in terms of research and innovation by around 2020, the survey said, indicating stiffer competition in China.
Denis Depoux, Roland Berger Asia head, said he considers this an opportunity.
"European business can be a key contributor to the innovation required by Chinese business to climb up the value chain, and they can also learn from domestic innovation for their own benefit, notably on go-to-market related innovation," Depoux said in a press release sent to the Global Times Wednesday.
