European companies previously viewed the complex challenges of doing business in China as the ‘growing pains’ of an emerging market.

However, with the risks of doing business increasing and the rewards decreasing, many investors now feel that their approach to the China market requires a strategic rethink, the chamber said in a release.

There have been positive signals that China intends to address some of the challenges faced by foreign enterprises, most notably via the State Council’s August 13, 2023, ‘Opinions on Further Optimising the Foreign Investment Environment and Increasing the Attraction of Foreign Investment’.

However, a year on from that publication, limited progress has been made on the implementation of key points contained in the document.

Meanwhile, some chamber members have begun both siloing their China supply chains and operations, and shifting investments previously planned for China to other markets to increase supply chain resilience, take advantage of comparatively lower labour costs and hedge against future geopolitical shocks.

The position paper details the challenges faced by European companies operating in China and offers more than 1,000 constructive recommendations to the Chinese government on how they can be resolved.

It provides a blueprint for rebuilding business confidence in the Chinese market and restoring it as the preferred destination for global investment.

“For a growing number of companies, a tipping point has been reached, with investors now scrutinising their China operations more closely as the challenges of doing business are beginning to outweigh the returns,” said Jens Eskelund, president of the chamber.

“While China still holds significant potential, this situation urgently requires more action from the Chinese Government, not more action plans,” he added.

Fibre2Fashion News Desk (DS)