Europeans’ confidence in business with China has collapsed: The number of companies…

The proportion of European companies that consider China a top investment destination has reached a record low, a European business lobby group said on Friday. It could take years to restore confidence in the world’s second largest economy.

The European Union Chamber of Commerce in China said in the latest edition of its business confidence survey that the outlook for doing business in China also reached its lowest level in the report’s 20-year history, over a quarter of respondents being pessimistic about their current growth potential and 44% being pessimistic about future prospects, notes Reuters.

With China’s economy facing “turbulence” and President Xi Jinping urging self-sufficiency and officials continuing a model of development focused on production and debt, despite reactions from the West, foreign firms are feeling more less welcome than before.

European Commission chief Ursula von der Leyen and French President Emmanuel Macron urged Xi on Monday to secure more balanced trade with Europe, but the Chinese leader gave little sign that he was prepared to offer major concessions during a visit to Paris .

“There are worrying signs that some European companies are either curtailing their operations or scaling back their ambitions in China as the challenges they face begin to outweigh the advantages of being here,” said Jens Eskelund, the chamber’s president.

“While the Chinese government frequently signals its intention to improve the business environment, we now need to see concrete action to restore investor confidence.”

Only 13% of firms said they see China as a top investment destination, the Chamber said, down from 16% in 2023 and far less than during the pandemic, when Beijing’s tough regime made that figure to drop by a fifth to 17% in 2019, 19% in 2020, 27% in 2021 and 21% during 2022, the year restrictions were finally lifted.

BASF, Maersk, Siemens and Volkswagen are among the members of the Chamber.

“European companies face increasing uncertainty in China, largely due to economic volatility and less predictable political direction,” said Denis Depoux, global managing director of management consultancy Roland Berger.

The pandemic and a housing crisis have exposed the limits of China’s development model, analysts say. And with China’s investment-consumption imbalance deeper than Japan’s since the 1980s — before its famous “lost decades” — the economy risks slowing to the point where it feels like it’s in recession.

European companies are feeling this situation, the Chamber stated, the number of companies reporting revenue increases also being at the lowest level ever recorded.

At the same time, nearly 40% of respondents said the biggest challenge for their businesses is the Chinese economy, with the global economic slowdown coming in second at 15%.

“Companies continue to shift investments originally planned for China to alternative markets that are perceived as more predictable, reliable and transparent,” the Chamber said.