Al’Oreal Store near Pedestrian Street on Nanjing Road in Shanghai, China on April 1, 2025.
cfoto | Future Publishing | Getty Images
Beijing – European business optimism about China has been the lowest on record, worse than the pandemic due to slower growth and geopolitical concerns.
A record of 73% of respondents from the EU Chamber of Commerce in China’s annual survey states that it has become more difficult to operate in Asian countries over the past year, marking a new high in the fourth year.
This is just one of the record lows of sentiment found in an annual survey published since 2004. The latest survey, released Wednesday, covered 503 respondents in January and February.
“Companies are really feeling the squeeze and pessimistic, but once again find a very persuasive supply chain in China and need a continuous presence [in] The Chinese market, Chamber of Commerce president Jens Eskelund told reporters this week.
Still, that doesn’t mean that business confidence is coming back.
“We haven’t seen the inflection point yet,” Eskellund said. “Many of that is summarised in uncertainty.”
The survey reflects how the challenges for foreign companies in China have been rising since the 2022 pandemic lockdown disrupt supply chains. Local brands are becoming more competitive, but overall consumer demand remains insufficient amid the real estate recession and job market uncertainty.
Cosmetics companies were particularly attacked. The industry denounced a decline in local demand and reported a 45% decline in 2024 revenues from a year ago. This was the second decline in the past decade, according to a report by Chamber.
Meanwhile, aviation and aerospace were rare industries that say it made it easier to do business in China.
Slow growth has led to a decline in China’s appeal to other markets.
The record low of just 12% of respondents was optimistic about China’s profitability over the next two years, but the fewest people on record ranked as the biggest destination for future investments. Another record low of 38% of respondents said they plan to expand in China over the next year.
Additionally, Beijing has announced efforts to improve the terms of foreign investment, but many challenges remain.
63% of respondents said they missed business opportunities in China last year due to restrictions on market access and barriers to regulatory. The responding medical device business said European companies experienced discrimination due to public procurement practices that support domestic players.
The scale of the pessimism reflects an annual survey of US companies in China released in late January, indicating that record-breaking shares of US companies are accelerating plans to relocate manufacturing or procurement.
Meanwhile, 53% of respondents said they would increase their investment in China if more steps were taken to improve local market access.
Supply Chain Competition
According to Eskerund, China still dominates the global supply chain as it is the only way to provide quality parts at the lowest price, citing conversations with hundreds of companies in six Chinese chapters.
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When asked about supply chain diversification, over a quarter of respondents said they are increasing oversight to China as a way to meet localization requirements and reach the domestic market.
A much smaller share of 10% of respondents said they are establishing alternative supply chains overseas while maintaining existing networks in China. In the survey, almost half of respondents said that Chinese suppliers are also moving operations to other markets.
China and EU leaders are scheduled to hold a summit in Beijing in July as they seek to strengthen bilateral relations amid US tariffs. The EU is China’s second largest trading partner on a regional basis.
