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European businesses are reconsidering their plans for China

European businesses are reconsidering their plans for China

September 22, 2022: – European businesses in China are revaluating their market strategies after this year’s Covid controls further isolated the country worldwide, said Joerg Wuttke, president of the European Union Chamber of Commerce in China.

China’s stringent Covid policy contains restricted international travel and business activity, especially after a two-month lockdown this year in Shanghai.

The strict measures of the last two years initially helped China recover more quickly from the pandemic’s shock than other countries.

But the policy differs with a world increasingly relaxing many Covid restrictions.

For European businesses, “we talk about a complete readjustment of our view on China over the last six months,” Wuttke told reporters at a briefing for the chamber’s annual China position paper, released Wednesday.

He said the lockdowns and delays for businesses had turned China into a “closed” and “distinctively different” country that might prompt companies to leave.

So far, most companies haven’t left, only some tiny ones, Wuttke said. But he pointed out the chamber isn’t able to survey businesses that decided not to enter China at all.

According to the chamber’s position paper, foreign direct investment from the EU into China declined 11.8% in 2020 from a year earlier. More recent figures weren’t available.

I’ve been here on and off for 40 years, and I’ve never seen anything like this, where all of the rash ideological decision-making is more important than economic decision-making.

“While there is still a select set of high-profile multinational companies ready to make billion-dollar splashes,’ the trend of declining FDI is unlikely to reverse. At the same time, European executives are heavily restricted from traveling to and from China to develop potential greenfield projects,” the report said.

China’s economy grew by 2.5% in the year’s first half, well below the official target of around 5.5%. Beijing indicated in late July the country might not reach that target.

Meanwhile, authorities have shown little sign of releasing the so-called dynamic zero-Covid policy.

China has reduced quarantine time for international and domestic travelers. But periodic lockdowns, whether on the tourist island of Hainan or Chengdu, have boosted business uncertainty.

Wuttke said he anticipates that before China could open its walls is late 2023, based on the period required to vaccinate enough of the population.

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European businesses are reconsidering their plans for China