欧盟企业在中国建议书+2023-2024（英文版）-416页_6mb

Summary of the European Business in China Position Paper 2023/2024

Core Content

The European Union Chamber of Commerce in China (European Chamber) has compiled this position paper to reflect the current state of European business operations in China, based on input from January to August 2023. It outlines the challenges, concerns, and recommendations of European companies operating in the Chinese market, with a focus on restoring business confidence and fostering sustainable cooperation.

Main Views and Key Information

1. European Business in China: A Historical Perspective

• European companies have long benefited from China's stable and efficient business environment.
• After the late 1970s reform and opening-up, China became a major growth engine for foreign investment.
• However, the past three years have seen a significant shift in the business climate, with European companies re-evaluating their assumptions about the Chinese market.

2. Current Challenges

• Policy Uncertainty: Erratic policy shifts, such as power supply disruptions in 2021-2022 and sudden lockdowns during the pandemic, have eroded predictability and reliability in the Chinese market.
• Economic Recovery: While initial optimism followed the end of the zero-COVID policy in late 2022, the economic rebound has not materialized as expected. Manufacturing activity, producer prices, and industrial profits have contracted, and service sector growth has slowed.
• Demographic and Employment Issues:
  • China's demographic dividend is fading due to low birth rates and an aging population.
  • Urban youth unemployment reached historic levels in 2023, with estimates suggesting a youth unemployment rate of up to 46.5% if including those not actively seeking work.
  • This has created a challenge for domestic consumption, as youth are a key demographic for economic growth.

3. Trade Imbalances and Geopolitical Tensions

• China's trade deficits with both the EU and the US have increased significantly, with the EU's trade deficit reaching EUR 395.7 billion in 2022.
• These imbalances have led to dissatisfaction among European politicians, who cite lack of reciprocal market access as a key issue.
• Geopolitical tensions, such as the Russia-Ukraine war, have further heightened caution among European companies.

4. Role of European Business in China's Development

• European companies have historically contributed to China's industrial upgrading through collaboration and competition with local firms.
• They are still seen as valuable partners, especially in industries that align with China's policy goals or where local suppliers are lacking.
• The European Chamber highlights that 63% of respondents to the 2023 Business Confidence Survey would consider expanding their presence in China if given greater market access.

5. Talent and Investment Challenges

• The decline in foreign talent in China has affected the transfer of know-how and best practices.
• Foreign workers are essential for innovation and productivity in key sectors.
• The number of foreign nationals in China has remained low, with only 0.06% of the population being foreign in 2021.
• In cities like Beijing and Shanghai, the proportion of foreign residents has decreased, which is a concern given the importance of these cities in China's future growth.

6. Policy Recommendations

• Restoring Confidence: Policymakers need to address structural issues that are hindering China's economic rebound and demonstrate a commitment to foreign businesses.
• Improving Market Access: Clear and consistent policies are required to reduce invisible barriers and ensure foreign companies can operate effectively.
• Enhancing Talent Policies: Policies that attract and retain foreign talent, such as the four-year extension of non-taxable allowances for foreign employees, are important steps, but more measures are needed.
• Strengthening Communication: Meaningful dialogue between government and industry is crucial to ensure new policies are practical and effective.

7. Sector-Specific Concerns

• Automotive Sector: Despite the removal of ownership restrictions, foreign companies still face regulatory hurdles, particularly in joint ventures and approval processes.
• Aviation and Aerospace: China has committed to liberalizing its computer reservations system (CRS) market, but in practice, foreign providers face lengthy licensing processes and are at a disadvantage compared to domestic competitors.
• Financial Services: The European Chamber highlights the importance of improving financial and tax policies to support foreign investment.

8. Conclusion

• European businesses remain committed to China despite the challenges.
• The European Chamber is ready to engage with Chinese stakeholders and provide recommendations to support China's recovery and long-term development.
• A more predictable and open business environment is essential to restore confidence and encourage continued investment in the country.