Firms look to smaller negative list for easier access to China market
About one-third of European companies have decided to put expansion plans in China on hold amid concerns over the economic slowdown, up from one-fourth in 2014, a survey showed Wednesday.
China's economic slowdown has "forced European businesses to cut back significantly," especially in terms of manpower, according to a survey jointly released by the European Union Chamber of Commerce in China and Roland Berger Strategy Consultants on Wednesday.
The lackluster economic growth is considered the top challenge facing European companies in China, followed by rising labor costs, the survey said.
The survey showed that 39 percent of the 541 companies surveyed are planning to cut costs in China to adjust to the downturn, up from 24 percent in 2014.
European companies also feel less upbeat about their growth prospects in China, with only 58 percent of the respondents remaining optimistic, compared with 68 percent in 2014, according to the survey.
To adapt to the slowdown, 31 percent of the companies have decided not to expand their China operations in response to the slowing growth, the survey said.
The GDP growth rate of the world's second-largest economy has slowed to a six-year low of 7 percent in the first quarter. Despite the government's stimulus measures, the economy continues to face strong headwinds, experts said.
"We don't see members leaving China … but they are considering other countries," Joerg Wuttke, the chamber's president, said at a press conference in Beijing on Wednesday, noting that China is too important in size for European companies and they are still committed to China.
European firms are keen to cooperate with China in high-end manufacturing as the country seeks to upgrade the sector amid its "Made in China 2025" plan, Liu Wenbo, a senior partner at Roland Berger, told media on the sidelines of the press conference.
The chamber reiterated that European companies believe they are not operating on a level playing field in China and regulatory barriers and market access issues need to be better dealt with.
The Chinese government is moving to further open up its market and create a better environment for investors. The National Development and Reform Commission, together with the Ministry of Commerce, announced a new catalogue for foreign investment in March, which opened more areas for foreign investment.
China's major State-owned companies, including energy giants like China National Petroleum Corp and China Petrochemical Corp, have started reforms to entice private and foreign companies to invest in some State projects.
However, Wuttke said that the European firms are "looking forward to a very small negative list [for foreign investment]," noting that the new catalogue is an improvement but only "small steps."
He also noted that the government's antitrust efforts, under which several foreign companies have been targeted, have seen improvements in terms of transparency.
The so-called "negative list" management approach, specifying the areas restricted to overseas investment, is supposed to offer greater freedom to foreign investors. The "negative list" approach is currently applied in the China (Shanghai) Pilot Free Trade Zone.
Bai Ming, a research fellow at the Chinese Academy of International Trade and Economic Cooperation under the Ministry of Commerce, said that the "negative list" management mode will be gradually introduced nationwide consistent with the government's agenda.
"The investment environment in China has been greatly improved during the past years, and it takes time before further changes can take place," Bai told the Global Times on Wednesday.
China is negotiating with the EU on a bilateral investment treaty, which is expected to further pave the way for mutual investments. "Some issues [on the investment environment] could be solved during the negotiations," said Bai.
