Fri, May 30, 2014 - Page 15 News List

EU firms spooked by slowing growth in China: survey

AFP, BEIJING

European businesses fear the “good times are over” in China, a survey showed yesterday, citing the country’s slowing economic growth, rising labor costs, falling profits, regulatory hurdles and pollution.

This year’s Business Confidence Survey report, released by the European Chamber business group and consultancy Roland Berger showed firms have become increasingly pessimistic as China’s economy slows.

“Business is already tough and it is getting tougher,” the report said. “This is leading many to the conclusion that the good times are over.”

The survey comes as China’s once double-digit annual growth rates have eased to the 7 percent range as its leaders try to pivot away from relying on exports and huge public investments.

However, while top European officials say they welcome the weaker rates as part of the drive to a more sustainable growth model, the report said the slowdown “surpassed rising labor costs as the No. 1 perceived challenge for future business in China.”

European Chamber president Joerg Wuttke told reporters: “Of course, it’s no major surprise if you are experiencing growth in the last 10 to 20 years of 10 percent or more in GDP [gross domestic product], and it goes down to 7 percent that you feel that business has become more difficult.”

The survey, based on responses from 552 European businesses operating in China, found that 68 percent of large companies with more than 1,000 employees said doing business had become harder over the past two years.

SOBER REALITY

“A new sober reality is developing,” the survey said, citing steadily declining financial performance, downwardly revised business plans and regulatory obstacles.

“The companies noted that margins are tight, but for the first time in the history of this survey margins in China have been on average lower than on their global company average profitability,” Wuttke said.

China’s notoriously bad air quality was cited by 68 percent of respondents as the top challenge in attracting expatriate talent, while 64 percent said it was the biggest challenge in retaining such personnel.

LOOKING ELSEWHERE

The overall situation is pushing companies to consider opportunities elsewhere, “with half the European companies routinely reviewing investment opportunities in other Asian countries,” the survey said.

However, despite the pessimistic tone, the report also acknowledged that even a challenging Chinese business environment still presents irresistible opportunities.

“European companies will continue to regard the Chinese marketplace as strategically important,” the survey found, as its “sheer size ... means that they will continue to generate a high proportion of their global revenues” there.

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