European businesses are experiencing unprecedented pessimism regarding the Chinese market, with optimism levels plunging to record lows that exceed the sentiments observed during the pandemic. According to a recent survey conducted by the EU Chamber of Commerce in China, an alarming 73% of participants noted that conducting business in China has become increasingly challenging over the past year. This figure signifies a continuous decline in confidence over four consecutive years.
The annual survey, which has been conducted since 2004, captured insights from 503 respondents during January and February. Jens Eskelund, the president of the chamber, remarked that while companies are feeling the pressure and displaying pessimism, the undeniable advantages of Chinese supply chains compel many to maintain a presence in the market. However, Eskelund acknowledged that there has not yet been a turning point in sentiment, attributing much of the concern to ongoing uncertainty.
Challenges for foreign businesses in China have intensified since the pandemic lockdown in 2022, which caused significant supply chain disruptions. Although local brands have gained competitive ground, overall consumer demand has remained weak due to the struggles in the real estate market and job market instability. The cosmetics sector has been particularly affected, reporting a significant 45% drop in revenue in 2024 compared to the previous year—the second decline in a decade.
In contrast, industries such as aviation and aerospace noted a slight improvement in their business conditions. Slower growth in China has diminished its attractiveness as a market. Only 12% of respondents expressed optimism about profitability in China over the next two years, and a record-low 38% indicated plans for expansion in the country.
Despite Beijing’s efforts to optimize foreign investment conditions, significant hurdles persist. A striking 63% of participants reported missed business opportunities due to market access limitations. Discriminatory public procurement practices were highlighted by the medical device sector as a particular challenge.
This prevailing sentiment mirrors findings from a recent survey of U.S. companies in China, which revealed many American firms are reconsidering their manufacturing and sourcing footprints. Despite these challenges, many European businesses recognize that China still plays a critical role in the global supply chain by providing high-quality components at competitive prices. The survey indicated that over a quarter of respondents are increasing local production to meet market demands, while only 10% are establishing alternative supply chains overseas.
Chinese and EU leaders are expected to meet in Beijing in July to discuss strengthening economic ties amidst rising tariffs from the U.S.