Survey for the European Union Chamber of Commerce in China: Chinese market is becoming more and more important - but European companies worry about the regulatory environment

• More than 500 European companies based in China were surveyed between March and April of 2010
• European business community remains optimistic about surging economic growth
• China is becoming an even more important element of their global business strategies for European companies
• Concerns about uncertainty in the business environment and ongoing regulatory unpredictability

The European Union Chamber of Commerce in China launched its seventh annual European Chamber Business Confidence Survey published in partnership with Roland Berger Strategy Consultants. It surveyed more than 500 European companies based in China between March and April 2010. The results – the most comprehensive and wide-ranging set of data ever gathered for this annual publication – show a European business community that remains optimistic about surging economic growth, but concerned about uncertainty in the business environment and ongoing regulatory unpredictability.

"Our members are confident about market growth in China and are backing this up with strategies based on investment and market-share expansion," says Jacques de Boisséson, President of the European Chamber. "However, they are concerned about an unpredictable regulatory environment that constrains their ability to compete." The discretionary enforcement of laws and regulations, opaque and burdensome registration processes as well as worries about the protection of intellectual property rights continue to be top concerns for European business in China. These persistent regulatory challenges temper the attractiveness of China as a long-term investment destination.

Good growth prospects – but also rising competition

"The results of the survey clearly show that European companies are confident about China's growth prospects and that the Chinese market offers many opportunities. But growth is only one side of the coin. In the long run it is profitability that determines the success of a company," adds Charles-Edouard Bouée, Asia President of Roland Berger Strategy Consultants. "Currently, only about one-third of the respondents are optimistic about their profitability prospects."

One factor impacting this sentiment is rising competition. As the Chinese market matures, so do domestic competitors, who are perceived to be a risk for future business by 58% of respondents. European companies need to raise their game in China and continue to differentiate their products and services in this complex market.

Key findings of the Business Confidence Survey 2010

• 78% of respondents reported optimism regarding growth in their sector over the next two years, while only 34% reported optimism about profitability in their sector for the same period.
• Some 49% of respondents reported that China has become a more important market for them, while only 4% say China has become less important to their overall strategy; 47% say there has been no noticeable change.
• 30% of members highlight China as the top investment destination for them today, with another 34% identifying China as a top 3 destination.
• 36% of respondents perceive the government policies affecting the business environment for Foreign Investment Enterprises (FIEs) as having become less fair over the past 2 years. Additionally, 39% expect government policies affecting FIEs in China to become less fair in the future.