European Companies in China Face Profit Challenges as Growth Slows
A recent survey conducted by the EU Chamber of Commerce in China has revealed that European companies in China are struggling to maintain profits, with growth slowing and overcapacity pressures increasing. Business members in Shanghai reported facing delays in payments and difficulties in enforcing contracts, painting a bleak picture of the current business environment.
According to the survey, only 30% of respondents said their profit margins were higher in China than their company’s worldwide average, marking an eight-year low. More companies also reported difficulties in transferring dividends back to their headquarters, further adding to the financial strain.
The focus on manufacturing and modest domestic demand in China has raised concerns about overcapacity and reduced profit margins for foreign businesses. Although Chinese authorities have made efforts to attract foreign investment, with recent policies benefiting industries like cosmetics and food and beverage, the challenges persist.
Jens Eskelund, President of the EU Chamber of Commerce in China, emphasized that these challenges may be more permanent in nature and highlighted the importance of understanding the composition of China’s GDP for foreign companies. With China’s National Bureau of Statistics set to release economic data for April next week, the spotlight is on the current state of the economy and its impact on foreign businesses.
Despite a record high of 39% of respondents noting that the local market was fully open in their industry, concerns remain about restrictions on foreign businesses. As European companies continue to navigate the challenging business landscape in China, finding ways to overcome these profit challenges will be crucial for their long-term success.
