Cloudy China reform outlook a worry for European firms
BEIJING, May 29 — European businesses operating in an increasingly competitive China are less confident that regulatory reforms will give them equal access to markets, the European Chamber of Commerce said in its annual business survey released today.
Still, the 557 European investors surveyed are bullish about China’s growth prospects and are unlikely to pull up stakes anytime soon.
China was “increasingly important” for 74 per cent of respondents’ global strategy, while only 3 per cent said the world’s second-largest economy was declining in importance.
The European companies in the survey generally credited their privately owned Chinese competitors with having achieved improved sales and marketing, and noted that Chinese companies as a whole enjoy better brand recognition.
State-owned competitors, on the other hand, are expected to continue working on their own government relations, with little improvement seen in the quality or pricing of their products — an indicator that those firms still rely on patronage for success, according to the survey.
“Although the 12th Five Year Plan is generally regarded as positive, the fact that it is increasingly viewed as having little impact on companies’ business prospects is reflective of a lack of optimism regarding reform,” the Chamber said.
The report was compiled before a raft of measures were announced this month to allow more private financing in sectors previously reserved for the state.
A large majority – 78 per cent — of European firms said they were optimistic about growth in China over the next two years.
“Almost without exception, European companies are bullish about their sector’s growth prospects in China,” the report said.
Nearly three-quarters were providing goods for the Chinese market, up from 56 per cent in 2011 and 63 per cent in 2010.
Despite the concerns about market access, 42 per cent said their profits were higher in China than their global average, and nearly half thought that profitability would not change in the next two years.
Over the next two years, 63 per cent said they would increase investment in China. Just over half plan to expand to other provinces in China, with many citing government incentives to move to the central or western parts of the country, where wages are lower. — Reuters