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.
Nvidia Corp CEO Jensen Huang (黃仁勳) is expected to miss the inauguration of US president-elect Donald Trump on Monday, bucking a trend among high-profile US technology leaders. Huang is visiting East Asia this week, as he typically does around the time of the Lunar New Year, a person familiar with the situation said. He has never previously attended a US presidential inauguration, said the person, who asked not to be identified, because the plans have not been announced. That makes Nvidia an exception among the most valuable technology companies, most of which are sending cofounders or CEOs to the event. That includes
TARIFF TRADE-OFF: Machinery exports to China dropped after Beijing ended its tariff reductions in June, while potential new tariffs fueled ‘front-loaded’ orders to the US The nation’s machinery exports to the US amounted to US$7.19 billion last year, surpassing the US$6.86 billion to China to become the largest export destination for the local machinery industry, the Taiwan Association of Machinery Industry (TAMI, 台灣機械公會) said in a report on Jan. 10. It came as some manufacturers brought forward or “front-loaded” US-bound shipments as required by customers ahead of potential tariffs imposed by the new US administration, the association said. During his campaign, US president-elect Donald Trump threatened tariffs of as high as 60 percent on Chinese goods and 10 percent to 20 percent on imports from other countries.
Taiwanese manufacturers have a chance to play a key role in the humanoid robot supply chain, Tongtai Machine and Tool Co (東台精機) chairman Yen Jui-hsiung (嚴瑞雄) said yesterday. That is because Taiwanese companies are capable of making key parts needed for humanoid robots to move, such as harmonic drives and planetary gearboxes, Yen said. This ability to produce these key elements could help Taiwanese manufacturers “become part of the US supply chain,” he added. Yen made the remarks a day after Nvidia Corp cofounder and chief executive officer Jensen Huang (黃仁勳) said his company and Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) are jointly
MARKET SHIFTS: Exports to the US soared more than 120 percent to almost one quarter, while ASEAN has steadily increased to 18.5 percent on rising tech sales The proportion of Taiwan’s exports directed to China, including Hong Kong, declined by more than 12 percentage points last year compared with its peak in 2020, the Ministry of Finance said on Thursday last week. The decrease reflects the ongoing restructuring of global supply chains, driven by escalating trade tensions between Beijing and Washington. Data compiled by the ministry showed China and Hong Kong accounted for 31.7 percent of Taiwan’s total outbound sales last year, a drop of 12.2 percentage points from a high of 43.9 percent in 2020. In addition to increasing trade conflicts between China and the US, the ministry said
RSS