European companies are growing more pessimistic as China’s economy slows, a European business lobby said yesterday, with many firms preparing for layoffs in the face of weaker economic growth and slow market reforms.
Beijing is targeting 7 percent annual growth this year, which would be the slowest in a quarter century, though many private economists doubt the government can keep that up for the next five years.
The EU Chamber of Commerce in China said its annual survey of members showed 39 percent of 541 respondents were planning to cut costs, a figure that rose from about 24 percent last year. Most of those are “planning employee layoffs,” the survey report said.
“Pessimism about growth and profitability has forced European business to cut back significantly, particularly through headcount reduction,” the chamber said.
Fifty-eight percent of European companies were still optimistic about growth prospects in China, though the number represents a 10 percentage point decline over last year’s survey. Companies planning to expand their China business has dropped by 30 percentage points since 2013, to 56 percent from 86 percent.
“This is really a paradigm shift in the economy, and companies are holding back investment because of uncertainty in the market place,” chamber president Joerg Wuttke said.
The chamber said disappointment is palpable with a perceived lack of progress on China’s vowed market reforms, which would potentially unlock opportunities for the foreign business community in many state-dominated industries.
“We ... don’t need propaganda and we don’t need campaigns. We need substantial change, bottom up, top down, from central government to the regions, and better laws and better implementation,” Wuttke told reporters at a briefing, adding that it would take time.
The EU and the US are trying to carve out more space for their companies in China’s market through respective bilateral investment treaties with Beijing, but Chinese President Xi Jinping (習近平) has said national security covers areas from politics and culture to the military, the economy and technology.
A raft of pending legislation, including rules on national security, contain language that some investors fear would discriminate against foreign firms, impinge upon investment treaty talks or dilute any eventual agreements.
“This whole notion of economic security can completely undermine the achievements you have in these bilateral agreements being negotiated,” Wuttke said.
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