BEIJINGâ€"More than a fifth of European companies are considering shifting their investments away from China because of regulatory barriers and other concerns, though they still deem China as an important strategic market, according to a survey by the European Union Chamber of Commerce released Tuesday.
The results of the annual Business Confidence Survey, which covered 550 European companies, showed 22% of respondents may shift their investments out of China. They cited regulatory barriers to accessing markets, as well as general economic concerns such as rising labor costs and slowing growth in China.
The survey comes as a number of challenges in China intensify. Chinese government data released Tuesday showed average wages at the largest companies rose by double digits last year compared with 2010. Also, China's economic growth is slowing, with the first quarter showing a rise of 8.1% from a year earlier, compared with the 9.2% increase for all of 2011.
In response to slowing growth, the Chinese government in recent weeks has unveiled support measures, including speeding up approvals for investment projects, rolling out subsidies for the purchase of energy-saving appliances, and targeted tax cuts.
But Davide Cucino, president of the European chamber, played down the possible benefits to European companies from the latest stimulus efforts. He predicted that they could receive a small portion of the benefits, as during the previous round of stimulus in 2009, when projects flowed mainly to local bidders.
"Only a small proportion of that stimulus has come to foreign enterprises. The new stimulus package might meet the same fate," he said.
The regulatory environment in China "continues to be perceived as being discriminatory against foreign companies," the European chamber said in a statement.
China's Commerce Ministry said it didn't have an immediate comment.
The survey found that 48% of European companies reported missing out on business opportunities due to regulations barring their access to certain markets.
At the same time, the survey showed that China is increasingly important to European companies, with 34% of respondents saying that China revenue represented more than 15% of their global revenue.
European companies also are planning geographical expansion in China, with the southwestern metropolis Chongqing and northern city Tianjin chosen as growing markets for foreign investment, the survey found.
European companies also expect to face harsher competitive pressure in China over the next two years.
Chinese private companies were found to pose a greater competitive challenge to Europeans than state-owned enterprises, since state-owned firms usually occupy strategic sectors that are closed both to foreign companies and private Chinese ones.
â€"Grace Zhu
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