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Challenges Persist for European Enterprises Operating in China Despite Relaxation of COVID-19 Restrictions

European firms in China are encountering increased hurdles as the nation progresses beyond the COVID-19 pandemic. In a recent analysis by the EU Chamber of Commerce in China, released on Wednesday, it was revealed that even though coronavirus restrictions have been eased, European companies are still grappling with challenging conditions.

Despite mainland China’s relaxation of stringent COVID-19 protocols in December and its expressed support for heightened business travel, European enterprises are struggling to revive their operations. The initial economic recovery has decelerated, and regulatory hindrances persist, casting doubts on the sustainability of their ventures in China.

The yearly business sentiment survey by the Chamber unveiled a notable rise in the number of companies lamenting missed prospects in mainland China due to market access constraints and regulatory roadblocks. While a portion of these challenges can be attributed to previous COVID-19 restrictions, the overall perspective remains gloomy.

As per Jens Eskelund, the head of the EU Chamber of Commerce in China, prospects for a substantial regulatory enhancement in the upcoming five years appear bleak. The survey indicated that ambiguous rules and regulations continue to pose the primary regulatory obstacle, securing their top position for the seventh consecutive year.

Recent times have witnessed China enforcing stricter regulations, particularly targeting alleged monopolistic behaviors in the internet technology field. Novel standards have been introduced to regulate personal data protection, mirroring European privacy protocols. Nevertheless, China’s emphasis on national security and the expansion of counter-spying statutes have compounded apprehensions among overseas enterprises. Reports of inspections and inquiries involving international consultancy firms in China have added to the unease among global business leaders.

The major impediments encountered by European firms in China encompass economic obstacles, with the slowdown in China’s growth and the global economy ranking as primary concerns. Trade tensions between the U.S. and China were noted as the third substantial challenge. China’s economic metrics for May fell below anticipations, signaling a deceleration compared to the previous month.

The uncertain macroeconomic ambiance has also dampened foreign investments in China. According to the survey, merely 55% of participants regard China among the top three destinations for impending investments, marking the lowest figure since the inception of the survey in 2010. This waning confidence is manifested in the absence of new small and medium-scale enterprises venturing into China since late 2019.

Image Source: imtmphoto / Shutterstock

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