European companies are cutting costs and scaling back investment plans in China as its economy slows and fierce competition drives down prices, an annual survey released yesterday showed.
Their challenges reflect broader ones faced by a Chinese economy hobbled by a prolonged real-estate crisis that has hurt consumer spending. Beijing also faces growing pushback from Europe and the US over surging exports.
“The picture has deteriorated across many key metrics,” the EU Chamber of Commerce in China said in the introduction to its Business Confidence Survey.
Photo: EPA-EFE
The same forces that are driving up Chinese exports are depressing the business outlook in the Chinese market. Chinese companies, often enticed by government subsidies, have invested so much in targeted industries such as electric vehicles (EVs) that factory capacity far outpaces demand.
The overcapacity has resulted in fierce price wars that cut into profits and a parallel push by companies into overseas markets.
In Europe, that has created fears that growing imports from China could undermine its own factories and the workers they employ. The EU slapped tariffs on Chinese EVs last year, saying China had unfairly subsidized electric vehicle production.
“I think there’s a clear perception that the benefits of the bilateral trade and investment relationship are not being distributed in an equitable manner,” EU Chamber of Commerce in China president Jens Eskelund told reporters earlier this week.
He applauded efforts by China to boost consumer spending, but said Beijing must also take steps to ensure that supply growth does not outpace that in demand.
The survey results show that the downward pressure on profits increased over the past year and that a fall in business confidence has yet to bottom out, Eskelund said.
About 500 member companies responded to the survey between mid-January to mid-February.
“It is just very difficult for everyone right now in an environment of declining margins,” he said.
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