Nearly 80% of European businesses in China feel the country is now a less attractive investment destination due to its more stringent Covid-19 restrictions.
The European Union Chamber of Commerce in China revealed the result in a survey on May 5. The survey looks over the impact of China’s zero-Covid policy and the Russia-Ukraine war on European businesses there.
China has launched more stringent Covid containment measures since February 2022. It has imposed total or partial lockdowns in at least 45 cities, causing massive uncertainty for businesses.
According to the survey, 3/4 of EU firms report negative impacts from China’s containment measures on their operations. 97% of business travel companies and 94% of logistics/warehousing companies said they had faced negative consequences.
A significant 77% of European firms report that China’s attractiveness as an investment destination has decreased because of its erratic control measures.
Companies in the aviation and education sectors have been hit particularly hard by China’s policy. As a result, respondents of these sectors—as well as those in utilities, primary energy, and other commodities—unanimously reported that China’s attractiveness has diminished.
Nearly a quarter (23%) of respondents consider moving planned or current investments from China to other markets. They want to seek more stable and predictable operating conditions.
The survey shows that more than a quarter of European firms report headcount decreases because of China’s Covid rules. This happens most in the education (80%), legal (46%), retail (43%), and cosmetics (40%) industries.
60% of the respondents have lowered their revenue forecasts for this year.
Besides the Covid policy, the Russia-Ukraine war also creates severe challenges to European business operations in China.
A third of respondents said the war in Ukraine had made China a less attractive investment destination for them.
Nearly two-thirds of respondents said they had faced disruptions transporting goods to and from Europe. In addition, rising material and energy costs are harming 63% and 58% of respondents, respectively.
Jörg Wuttke, president of the commerce chamber, said their members are willing to weather the current storm. Still, if the current situation continues, they will increasingly evaluate alternatives to China.