With “business confidence now at an all-time low” due to slowing domestic demand and overcapacity in some industries, the annual European Business Situation in China report called on Beijing to open up its economy and allow a freer market to determine the allocation of resources.
The report also recommended introducing policies to boost domestic demand.
Profit margins in China are at or below the global average for two-thirds of companies surveyed earlier this year, according to a report published by the European Chamber of Commerce in China on Wednesday.
In August, China filed a complaint with the World Trade Organization over tariffs imposed by the European Union on Chinese-made electric cars.
It also launched an anti-dumping and anti-subsidy investigation into European dairy products, wine and pork exports. The tit-for-tat measures have raised fears of a full-scale trade war.
Many European companies see the returns on investing in the world’s second-largest economy as not worth the risks, due to issues including China’s economic slowdown and a politicized business environment.
“For some European shareholders, the risks of investing in China are starting to outweigh the rewards, a trend that will only increase if key trade concerns are not addressed,” Jens Eskilund, president of the European Chamber of Commerce in China, said in the report’s introduction.
The European Chamber of Commerce report proposes more than 1,000 recommendations to China to address the challenges and problems facing European companies in China and boost investor confidence. Among these recommendations is a call for China to refrain from punishing foreign companies for the actions of their governments.
Other recommendations include ensuring that policies are in place to attract foreign investment, and refraining from “modifying these policies.”
The report also recommended that the EU should engage proactively with China, and that its responses should be “measured and proportionate” when disputes arise with China.
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