The flip flop is spectacular. Seen as an unprecedented boon by western investors for twenty years, China has been seen as a risk for a number of years. To the point that in 2022 the situation has reversed and in the eyes of many entrepreneurs this risk outweighs it. This is the main lesson of the latest annual “position paper” released by the European Chamber of Commerce in China on Wednesday 21 September.
The reason lies in a formula that appears at the beginning of the report: “Ideology triumphs over economy. Maintaining the zero-Covid policy and closing the borders, Beijing’s emphasis on self-sufficiency, Russia’s support in the face of Ukraine – making aggression against Taiwan even more likely, with geostrategic but also unpredictable economic consequences – public opinion and thus increasing nationalistic consumers… All this makes European investors worried, even suspicious. China is a “less predictable, less reliable and less efficient” country, the report summarizes.
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Although the vast majority of European companies based there do not intend to leave this country, which remains an unrivaled market and industrial base, few intend to increase their investments. But on the contrary. Reducing dependence on Chinese risks has become a priority for European companies. Despite additional costs and a temporary disorganization of the production chains, the industrialists of the old continent are planning to multiply investments in third countries to be on the safe side, rather than relying exclusively on the Chinese market.
In addition, European investments are increasingly concentrated on the Middle Kingdom, according to a study published in mid-September by the Rhodium Group research institute. In 2013, the top 10 European investors accounted for 40% of the continent’s investment in China. In 2019, this percentage reached 88%. In 2021 it would have dropped to 70%.
Difficulty attracting talent
Four countries do well: First and foremost Germany (almost 50% of European investments), followed at a great distance by Great Britain, the Netherlands and France. Concentration is also sectoral, with five main sectors: automotive, well ahead of food, pharmaceuticals, chemicals and consumer goods.
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