Business Confidence Survey 2013
Pressures from increasingly challenging market and economic conditions in China, which are exacerbated by a regulatory environment that continues to be demanding and at times discriminatory, have led to a clear downturn in profitability and revenue growth for European companies. While the outlook on profitability has declined to an all-time low, reforms to promote greater rule of law and fairer competition are clearly identified as major potential drivers to stimulate Chinese economic performance in the future. However, companies remain unsure as to whether China’s leaders have the appetite to seriously address these necessary economic reforms, according to the Business Confidence Survey 2013 released today by the European Union Chamber of Commerce in China and Roland Berger Strategy Consultants.
As China’s economy loses some of its steam and its marketplace matures, European companies in China have started to feel a pinch to their bottom lines. The number of EU companies reporting revenue growth shrank to just 62% and those noting profitability growth decreased to 44%, leaving only 64% of European companies in China profitable. The most notable factor negatively affecting net profit margins is rising labour costs, but slower economic growth in both China and Europe, as well as increased competition, also had notable affects. These market dynamics that affect all players in the Chinese marketplace are aggravated by a discriminatory regulatory environment for European companies. Market access is the key concern. Approximately half of European companies noted missed business opportunities due to market access and regulatory concerns, thus challenging the government’s assertion that China has a level playing field.