Jens Eskelund says market access, clear regulation key for European companies
China “must do more” to restore plunging confidence among European companies navigating its post-pandemic recovery, the new head of the European Union Chamber of Commerce in China told Nikkei Asia.
Jens Eskelund, who took up the presidency of the 1,800-member chamber in late May, said his first weeks in office have been marked by visits from government delegations on an apparent charm offensive to repair China’s bruised reputation as a top investment destination.
“Although this represents a positive change from pre-COVID, when we had usually struggled to get their attention, it is left to be seen whether this new intensity of engagement will produce any tangible results,” Eskelund said in a recent video interview.
“The Chinese government must do more to restore our member companies’ traditional confidence that if they put their money here in China, it will be safe,” he added.
Foreign business sentiment in China plunged to all-time lows during the pandemic, as overseas operators grappled with repeated virus lockdowns and other movement restrictions under Beijing’s strict zero-COVID policy. That prompted some to dial back new investment or threaten to quit the huge market altogether.
Jens Eskelund, President of the European Union Chamber of Commerce in China, says Beijing should beef up market access for European companies. © AP
The initial euphoria that greeted Beijing axing coronavirus restrictions at the end of last year has given way to slumping confidence, Eskelund said, as the world’s second-biggest economy stages a weak rebound amid soaring tensions with the West.
Eskelund, who is also chief representative for Danish shipping line Maersk in greater China and Northeast Asia, called for the government to beef up market access for European companies and to create a less opaque regulatory environment.
“Probably, we have had unrealistic expectations about China coming out of COVID, and although we still don’t see European companies running for the exit here, we have not seen a single European company entering China since COVID began three and a half years ago,” he said.
The European Chamber’s latest member survey, published last week, underscores concerns about China’s viability as a place to operate.
The report said 10% of members have already relocated, or plan to relocate, their Asian headquarters out of China, while 53% have no plans to expand their China operations this year. Among those surveyed, 38% have seen their Chinese customers and suppliers shift investment out of the country. That downbeat sentiment is largely tied to the more volatile business environment and weaker financial results. Some 64% of surveyed companies said doing business became more difficult in 2022, while 30% of respondents posted revenue declines last year, compared with only 10% in 2021.
Anxiety among Chamber members is also being driven by concerns over China-focused restrictions on supply chains and carbon emission rules, Eskelund said. China has been accused of using forced labor in its Xinjiang region, prompting Western-led restrictions on sourcing products from the territory, while the EU’s Carbon Border Adjustment Mechanism (CBAM) will raise tariffs on carbon intensive products imported by the bloc. That could push factory owners in countries lacking renewable energy to move elsewhere.
“While the COVID pandemic and geopolitical tensions made a strong case for a shift toward resiliently diversified value chains, it is less efficient and more costly to invest in multiple countries as opposed to only in China,” Eskelund said. “So many European companies here have grown more cautious in their investment decisions altogether.”
In a separate online interview, outgoing President Joerg Wuttke said the last few months were the worst of his 10 years at the Chamber as China’s key manufacturing sector sank into the red, including an auto sector that draws many European companies.
After COVID, “flights, restaurants and cinemas were full quickly, but our member companies are typically manufacturing oriented, as opposed to being active in the service sector,” he said.
Wuttke, who was outspoken about the damage China’s zero-COVID policy did to business sentiment, warned that things could get even worse for EU Chamber members as Beijing pursues greater self-sufficiency. He pointed to a 2017 Chamber policy paper about what was then Beijing’s new Made in China 2025 drive.
“In terms of high-speed trains, for example, Made in China 2025 early [on] showed that China will arrive at the current situation where China doesn’t import any trains from us anymore [with] China being a global champion,” he said.
Source : NIKKEI Asia