28th Oct 2016

Rising costs, red tape frustrate EU firms in China

  • One in five EU companies in China are considering moving their investments to other developing countries. (Photo: chloeloe)

Most EU firms based in China plan to invest even more, but one in five might leave due to red tape and rising labour costs, a survey says.

The report - by the EU chamber of commerce in Beijing and Roland Berger Strategy Consultants - says nearly a quarter of the 550 EU companies who took part in the poll are considering shifting investments away from China.

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They are looking to other developing nations for opportunities, despite widespread optimism about Chinese economic growth over the next two years.

China's average wage in some sectors increased by double digits in 2011 compared to 2010, making rising labour costs a "significant concern" for 63 percent of the respondents.

Meanwhile, regulatory reforms intended to open up the Chinese market and promises that foreign companies will be treated equally to Chinese ones have yet to fully materialise.

The report noted China wants to rely less on foreign imports and is pushing for greater domestic consumption.

Most of the EU companies are now making goods and services for the Chinese market and are in direct competition with state-owned and private Chinese enterprises.

Nearly all said that expanding Chinese domestic demand is instrumental in their global business strategies, but many complained that Chinese officials favour Chinese-owned firms in the way they apply the rules.

Half of the respondents reported missed opportunities due to market access barriers. Two-thirds estimated that the value of such opportunities represents up to 50 percent of their revenues.

"Unfortunately, the development of the regulatory environment is not in step with the development of the market," said the report.

The European Parliament took a similar view when it adopted a non-binding resolution on the imbalance of trade relations between the EU and China on 23 May.

MEPs pointed out that unfair trade barriers on EU companies wanting to enter the Chinese market are creating major trade imbalances.

The EU exported €136.2 billion in goods to China in 2011, a 20 percent increase compared to 2010. For its part, China sent €292.1 billion of goods to Europe in 2011.

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