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European firms are rethinking ‘closed’ China plans

BEIJING—European companies in China are reassessing their market plans after Covid controls further isolate China from the world this year, said Jörg Utke, president of China’s European Union Chamber of Commerce.

China’s strict Covid policies have restricted international travel and business activities. 2 months lockdown in Shanghai this year.

The tough measures over the past two years initially allowed China to recover from the shock of the pandemic more quickly than other countries.

But the policy is in increasing contrast to a world that is increasingly easing many Covid restrictions.

As for European companies, “we are talking about completely recalibrating our view of China over the past six months,” Wuttke said at a briefing for the chamber’s annual China position paper released Wednesday. told reporters at

Germany’s foreign direct investment in China has increased by about 30% in the first eight months of the year compared to the previous year, China’s Ministry of Commerce said on Monday.

VCG | Visual China Group | Getty Images

He said the lockdown and business uncertainty could make China a “closed” and “distinctly different” country that businesses could pull out of.

So far, most companies have not pulled out, only some very small ones, Utke said. But the Chamber of Commerce cannot investigate companies that have decided not to enter China at all, he said.

According to the chamber’s position paper, foreign direct investment from the EU to China in 2020 fell by 11.8% year-on-year. No recent figures were available.

In my 40 years of coming and going here, I have never seen anything like this where suddenly ideological decisions matter more than economic ones.

Jorg Buttke

President of the EU Chamber of Commerce in China

While there is still a “select group of high-profile multinationals poised to inject billions of dollars”, the downward trend in FDI is unlikely to reverse, and European executives are likely to “It has been severely restricted from entering and exiting China to develop major greenfield projects,” the paper said.

China’s economy grew 2.5% in the first half, well below the official target of around 5.5%.Beijing showed in late July The country may not reach its goals.

Meanwhile, authorities have shown little sign of lifting the so-called dynamic zero Covid policy.

China has shortened the quarantine time for domestic and foreign travelers. But sporadic lockdowns hainan tourist island city ​​of or Chengdu, Business uncertainty continues to rise.

Utke said he expects China to be able to open its borders until late 2023, based on the time required to vaccinate a sufficient number of people.

“Ideology trumps economy”

European companies remaining in China increasingly face an environment where “ideology trumps economy,” the chamber’s position paper said in its executive summary.

“In my 40 years of coming and going here, I have never seen anything like this, where ideological decision-making suddenly becomes more important than economic decision-making,” said Wuttke. rice field. “And it may be amplified by voices from outside America.[n] With sanctions, America cutting China out, I can partly understand why self-reliance is high on the agenda. ”

Investors are still in 'wait-and-see mode' when it comes to China, analysts say

He was referring to China trying to build its own technology and other industries over the past few years.

Meanwhile, the United States has, among other measures, restricted its own companies from supplying key components to Chinese technology companies such as Huawei.

The Chamber of Commerce did not specifically say what this ideology consists of, but said China’s Covid policy embodies the country’s “break away from the rest of the world.”

Read more about China on CNBC Pro

Utke said despite lengthy candid conversations with Chinese government officials, policy has not changed.

“I think these people are torn between what they have to do and what they could possibly do,” he said. “So [there’s] Very strict, very clear instructions from the top, what this should be, that’s the ideology. How can you challenge ideology? ”

Chinese President Xi Jinping said earlier this month that the country was “continuing its response to Covid-19 and promoting its economic and social development in a well-coordinated manner.” Remarks by the Ministry of Foreign Affairs of China.

“China has entered a new stage of development,” Xi Jinping said, adding that “China’s door of opening up, friendship and cooperation is always open to the world.” His remarks came during his first overseas trip to Kazakhstan and Uzbekistan since the pandemic began. During that time he met with the leaders of several countries in the region.

Over the past few years, China’s leaders have tried to rally the country around the ruling Communist Party and his agenda. “The Great Revival of the Chinese Nation” Xi plans to consolidate power at a major political meeting next month.

Huge market in China

Foreign companies already in China generally stay where they are for the time being.

Even if China’s growth slows, its low size and base “actually make a compelling case.” [for foreign businesses]we’re still going to make it,” Wuttke said.

Some, especially the German car giants, are investing more.

Why China Shows No Signs of Backing Down from 'Corona Zero' Strategy

https://www.cnbc.com/2022/09/20/european-businesses-are-rethinking-their-plans-for-a-closed-china.html European firms are rethinking ‘closed’ China plans

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