China Direct

EU-China Opinion Pool: Calibrating interdependence with China

One of the EU’s most heated current debates about China concerns the question of how to reduce risks arising from interdependencies with the country. Over the last years, Beijing has demonstrated its readiness to make use of economic coercion. And the Covid-19 pandemic and looming geopolitical crisis over Taiwan has made Europe acutely aware of supply-chain risks. Business leaders and politicians in Europe are now discussing options to ensure competitiveness and economic resilience.

MERICS Analyst Grzegorz Stec has asked experts for their opinions on how the EU should proceed as it attempts to calibrate interdependence with China.

For a comprehensive assessment from the EUCCC, BusinessEurope, BDI, GEI and Merics please click on the link below:

“Calibrating interdependence with China - how should the EU proceed? (4 min read)

With our sincere thanks to the team at Merics for sharing this latest EU-China opinion poll.

Flash Survey Report: China’s COVID-19 policy and Russia’s war in Ukraine cause severe disruptions to European business in China

Beijing, 5^th May 2022 – The European Chamber, in partnership with Roland Berger, today released a survey on the impact that China’s COVID-19 policy and Russia’s war in Ukraine are having on European business in China. The results show that both factors are creating severe challenges to European business operations, with logistics suffering the most overall. Significantly, as a result of China’s COVID-19 policy, 23% of respondents are now considering shifting current or planned investments out of China to other markets—more than double the number that were considering doing so at the beginning of 2022, and the highest proportion in a decade—and 7% are considering the same due to the war in Ukraine.

The introduction of more stringent COVID-19 containment measures in 2022, with China imposing full or partial lockdowns in at least 45 cities, is causing massive uncertainty for businesses. Three quarters of respondents report the measures have negatively impacted their operations, most acutely on logistics/warehousing, business travel and the ability to conduct face-to-face meetings, which have had a negative impact for 94%, 97% and 94% of respondents respectively.

Supply chains have taken a pounding, both upstream and downstream, with 92% of companies being impacted by measures such as China’s recent port closures, the decrease in road freight and spiralling sea freight costs.

More than a quarter of European businesses report headcount decreases because of China’s COVID-19 policy, with this happening most in the education (80%), legal (46%), retail (43%) and cosmetics (40%) industries. Other key findings include the following:

• 60% of respondents have decreased their 2022 revenue forecasts.
• 91% of respondents believe China should focus on vaccinating the entire population, including those over 60; 82% believe that positive cases with no or mild symptoms should be permitted to quarantine at home to alleviate pressure on the health system; and 82% believe that the best mix of vaccinations and boosters should by permitted, including making foreign mRNA vaccines available to all residents in China.
• 78% of respondents feel that China is a less attractive investment destination as a result of its more stringent COVID-19 restrictions.
• The war in Ukraine has also made China a less attractive investment destination for a third of respondents. The war is exacerbating challenges faced by businesses as supply chains disintegrate. Nearly two thirds of respondents have faced disruptions transporting goods to and from Europe. In addition, rising material and energy costs are having a negative impact on 63% and 58% of respondents respectively.

“Our members are willing to weather the current storm, but if the current situation continues, they will of course increasingly evaluate alternatives to China,” said Jörg Wuttke, president of the European Union Chamber of Commerce. “A predictable, functioning market is better than one that, despite having high growth potential, is volatile and suffers from supply chain paralysis.”

“The uncertainty caused by the stringent and dynamic COVID-19 policies impedes the ability for European companies to make sound business decisions, in an overall deteriorating economic context due to the impact of the war in Ukraine,” said Denis Depoux, global managing director of Roland Berger. “A clearer crisis exit strategy would help maintain confidence in a European business community still highly committed to Chinese markets.”

Download the report.

 

中国疫情防控政策与俄乌冲突对欧洲在华企业产生严重影响

      北京，2022年5月5日 – 中国欧盟商会与罗兰贝格今日联合发布关于中国疫情防控政策和俄乌战争对欧洲在华企业所产生的影响的调查报告。结果显示，这两个因素都给欧洲企业的商业运营带来了严重挑战，其中物流业所受的整体影响最大。值得关注的是，中国为遏制疫情而采取的严格防控措施导致23%的受访企业正考虑将现有或计划中的对华投资转移至其他市场。这一结果与2022年初有此想法的企业数量相比，增加了一倍多；这也是过去十年间达到的最高值。另有7%的受访企业表示，俄乌战争导致他们正考虑取消现有或计划中的对华投资。

      2022年，随着国内各地落实更为严格的疫情防控措施，中国已有至少45座城市实施了全面或局部封控，给企业生产经营带来了巨大的不确定性。四分之三的受访企业表示，公司整体运营受到严重影响，主要集中在物流仓储压力、商务旅行暂停以及线下会议取消这三方面，受影响企业分别占94%、97%和94%。

      中国的港口关闭、公路货运量下降以及海运价格飙升等一系列原因导致供应链上下游面临严峻考验，92%的受访企业受到严重影响。

      在中国严格的防控措施下，逾四分之一的欧洲企业遭遇人才流失，流失率最高的行业集中于教育（80%）、法律（46%）、零售（43%）和化妆品（40%）。

      其他主要结果包括以下几点：

• 六成受访企业预计2022年收入将有所下滑。   
• 91%的受访企业认为中国应积极推进全民疫苗接种，尤其是提高60岁及以上易感人群和高危人群的疫苗接种率；82%的企业建议，应允许无症状感染者或轻微症状感染者实行居家隔离，以减轻公共医疗系统的压力；82%的受访企业建议国内应推广新冠疫苗序贯加强免疫接种，并早日投入使用mRNA疫苗。
• 78%的受访企业认为，在国内严格的疫情防控政策下，中国市场作为投资目的地的吸引力下降。
• 三分之一的受访企业表示，俄乌战争导致中国作为投资目的地的吸引力下降。战争导致的供应链断裂正在进一步加剧企业面临的挑战。近三分之二的受访企业面临往返中欧的物流中断。此外，原材料和能源价格的上涨分别给63%和58%的受访企业带来挑战。

      “我们的会员企业愿意咬紧牙关渡过眼前困难，但如果现状持续下去，更多企业将开始评估替代中国市场的其他方案，”中国欧盟商会主席伍德克表示，“与一个潜力巨大但是不稳定而且供应链濒临瘫痪的市场相比，可预测性强且运作正常的市场更具吸引力。”

      “特别是在乌克兰战争的影响导致整体经济形势严峻的情况下，严厉及具有动态性的疫情政策造成的不确定性阻碍了欧洲企业做出合理商业决策的能力。因此，一个更为清晰的应对危机退出策略，将有助于欧洲商界保持对中国市场的信心。” 罗兰贝格全球管理委员会联席总裁戴璞先生说道。

Stop Press: EUCCC launches 2021/2022 Annual China Position Paper

 

European Chamber Position Paper Highlights Costs of Self-reliance

Dear CBI Members and Partners,

• On 23^rd September, the European Union Chamber of Commerce in China released its European Business in China Position Paper 2021/2022 (Position Paper), its most important publication and the cornerstone of its annual advocacy plan.
• Compiled by its 35 working groups and sub-working groups over a six-month period, the 930 constructive recommendations contained in the Position Paper illustrate both the depth of the challenges faced by European companies in China and their commitment to supporting the improvement of the business environment.
• Despite the many difficulties experienced in 2020 due to the COVID-19 pandemic and increasing geopolitical tensions, European businesses in China did well overall, and remain firmly committed to the market.
• However, while business opportunities still remain, signs that China is turning inward—as can be seen in its 14^th Five-year Plan’s (14FYP’s) aim to increase self-reliance, and even achieve self-sufficiency, in parts of the economy—are a real cause for concern for foreign-invested enterprises.
• European companies are unsure about the extent to which they will be able to contribute to China’s future growth, with some fearing market exit, and there are now doubts over China’s future growth trajectory.

To read more and to download the Position Paper Report please click here.

Our sincere thanks to the European Union Chamber of Commerce in China for kindly sharing its 2021/2022 Position Paper.

 

Chinese Foreign Direct Investment (FDI) into Europe: 2020 Update

 

Dear CBI Members and Partners,

Please find an Executive Summary and a link to the full report, kindly provided by Merics, the Mercator Institute for China Studies, below:

Chinese FDI in Europe: 2020 Update

Investment falls to 10-year low in an economically and politically challenging year

Executive summary

• China’s global outbound investment hit a 13-year low in 2020: Concerns that the Covid-19 global pandemic slump might trigger another round of Chinese distressed asset-buying proved unfounded. Instead, China’s global outbound M&A activity dropped to a 13-year low, as completed merger and acquisition (M&A) transactions totalled just EUR 25 billion, down 45 percent from 2019.
• China’s FDI in Europe continued to fall, to a 10-year low: Shrinking M&A activity meant the EU-27 and the United Kingdom saw a 45 percent decline in completed Chinese foreign direct investment (FDI) last year, down to EUR 6.5 billion from EUR 11.7 billion in 2019, taking investment in Europe to a 10-year low. However, greenfield Chinese investment reached its highest level since 2016 at nearly EUR 1.3 billion.
• The “Big-3” reclaimed their top spot, Poland emerged as a key recipient: More than half of total Chinese investment in Europe went to the “Big Three” economies – Germany, the UK and France. However, the UK saw Chinese investment plummet by 77 percent. Poland rose to become the second most popular destination, though inflows of EUR 815 million were largely concentrated on one acquisition.
• China’s state-owned enterprises (SOEs) took a higher share in a quiet market: SOEs were responsible for 18 percent of total Chinese FDI to Europe, higher than 11 percent 2019 but still significantly below historical averages. Their investment stayed relatively stable in absolute terms, however, concentrating in energy, infrastructure and basic materials. Private sector investment dropped by almost 50 percent.
• Chinese investment was spread more evenly across sectors: Small- and mid- size transactions dominated in 2020, with no major billion-dollar acquisitions as in 2019. As a result, Chinese investment was spread more evenly across sectors. Infrastructure, ICT and electronics were the top three sectors, attracting 51 percent of the total.
• Chinese FDI faces greater scrutiny by EU member states: The Covid-19 crisis prompted the EU to issue guidelines stepping up scrutiny of FDI in Europe’s critical assets. 14 EU member states, including Italy, France, Poland and Hungary, have updated their FDI screening mechanisms last year. Member states have also moved to block several acquisitions by Chinese firms.
• Headwinds to Chinese investment in Europe will grow in 2021: Chinese FDI activity into Europe continued to fall in the first quarter of 2021 and has remained weak elsewhere, even as global M&A activity has recovered and surged to a 10- year high of EUR 1.08 trillion. Europe remains an attractive investment location. However, continued disruption from Covid-19, high barriers to outward capital flows in China and rising regulatory barriers to foreign investment in Europe have all contributed to low levels of Chinese investments. Deteriorating EU-China relations will create additional headwinds for Chinese investors going forward.

The full Executive Summary and Report can be downloaded directly via this link.

Our thanks again to Merics and the Rhodium Group.

 

 

EUCCC launches 2017 China Business Confidence Survey

 

The European Chamber of Commerce in China launched its annual business confidence survey on 31st May in Beijing and Shanghai.

Headlines included:

• Half report feeling less welcome compared to when they first entered the market.
• Over the last four years, more than half have consistently reported that foreign-invested enterprises (FIEs) are treated unfairly compared to domestic Chinese companies.
• 61% believe that environmental regulations are strongly enforced against foreign companies, while only 14% and 17% report that they are strongly enforced against Chinese privately-owned enterprises (POEs) and Chinese state-owned enterprises (SOEs) respectively.

For a full press report and to download the Report please follow the links below.

http://www.europeanchamber.com.cn/en/press-releases/2554

http://www.europeanchamber.com.cn/en/publications-business-confidence-survey

European Chamber releases 2016 China Business Confidence Survey

The European Chamber, in cooperation with Roland Berger, today released its annual Business Confidence Survey 2016. The survey finds that Beijing’s failure so far to deliver on promises that foreign-invested enterprises will enjoy a more open, competitive market has fostered mounting pessimism: a significant 41% of European companies are now re-evaluating their China operations and planning to cut costs, including through headcount reduction.

Although 47% also report that they plan to expand their operations in China, this represents a thirty-nine point decrease from 2013, when an overwhelming 86% of European companies were intending to do so. However, a clear majority of European business would likely increase their investment in China in the event of market access barriers being removed.

Please read the full press release here. The full download can be accessed here.

The CBI's International Footprint - building the voice of business globally

 

[Image courtesy of www.cbi.org.uk]

As the UK's premier business lobbying organisation, the CBI operates around the world to help our companies do business. Our offices in the UK, China, India, mainland Europe, and the U.S. actively promote Britain's business interests overseas, offering information, lobbying, and networking.

Please click here to read more about the CBI's international offering.

 

 

Stop Press - 2011 EU China Business Confidence Survey

 

 
[Image courtesy of www.europeanchamber.com.cn]

The findings of the annual EUCCC business confidence survey will be circulated tomorrow, Wednesday 25th May 2011.

China Direct will be attending the official Survey Launch event in Beijing and looks forward to sharing with members key headlines and observations shortly.

EUCCC Business Confidence Survey

Background:

Since 2004, the European Chamber has conducted an annual survey of member companies to monitor their views on the business environment and gather their opinions on trade and investment in China.

The European Chamber Business Confidence Survey 2011 is once again produced in partnership with Roland Berger Strategy Consultants, and draws on feedback from nearly 600 European companies – the highest participation rate ever.

This year's survey offers insight on European business confidence in the Chinese market at a time of impressive growth, rising competition, and the release of China’s 12th Five Year Plan.
 
The results – the most comprehensive and wide-ranging set of data yet gathered for this annual survey – will provide the most up-to-date and in-depth analysis on sentiment among European businesses about the Chinese business environment.

This information will have important implications for Chinese and European policy-makers, businesses, organizations as well as the general public.

China's Twelfth Five Year Plan (2011-2015) - the Full English Version

 

The Delegation of the European Union in China has very kindly prepared a full English translation of China's 12th Five-Year Plan (2011-2015).

In mid-March 2011, the National People's Congress (NPC), China's top legislature, approved the new Five-Year Plan (FYP).

China's FYPs are blueprints which outline key economic and development targets for the country for the next five-year period.

This is essential reading for businesses seeking to either expand their existing China operations or position themselves in the market for the first time.

To download the full translation of the current FYP please click below:

Download Full translation 5 Yr Plan 2011-2015

 

New CBI Director-General John Cridland - now in post

 

 
[Image courtesy of www.cbi.org.uk]

China Direct is delighted to welcome John Cridland as the new Director of the CBI.

Mr. Cridland started his five year tenure today and gave an interview to BBC News during which he highlighted the need for growth and a job-rich recovery in the UK. For more on this interview please click here.

The CBI's Beijing office looks forward to seeing Mr. Cridland out in China and the region later in the year and will keep CBI members updated as to his itinerary shortly.

For more on Mr. Cridland's appointment, which was made in November 2010, please read here.

The Beijing office will now be closed for the duration of the Chinese New Year Festival (02-09 Feb) although China Direct hopes to continue blogging wherever possible!

A very happy New Year of the Rabbit to you all.