More than a year has passed since China abolished its COVID-19 containment measures and reopened its borders. However, the initial rush of optimism that the business community experienced at the beginning of 2023 is long gone, and now we are left with the strange aftertaste of our unfulfilled expectations of a strong recovery.

Our Business Confidence Survey 2023 (BCS 2023) showed that overall confidence in China’s growth prospects is deteriorating.[1] Businesses are increasingly of the opinion that the pandemic and related prevention measures were not the root cause of China’s economic troubles but instead masked deeper, structural issues that are slowing the country’s once powerful growth engine. This is more worrisome because, as unlike ‘zero-Covid’, structural issues cannot be remedied overnight.

Moreover, sentiment is spreading that, with China’s economic growth slowing and its focus on ‘self-reliance’ solidifying, only foreign companies in industries that are directly supportive of China’s policy goals—or those that are temporarily needed due to a lack of local suppliers—will prosper the way they did when China’s growth was pushing double digits.[2]

Although European firms’ perceptions about the Chinese business environment might be changing, they still have a shared interest in China’s continued success. If granted greater market access, almost two thirds of respondents to the BCS 2023 would be willing to increase their investments in the country.[3] This year’s survey, which we are conducting in the first two months of 2024, is going to be an important indicator on where we are now.

While 2023 may have been disappointing, it has also given us reasons to be optimistic about the year ahead. Last summer, Chinese policymakers sent several signals that they would take steps to develop the private sector, including through the promotion of foreign investment. Notably, in August 2023, the State Council released the Opinions of the State Council on Further Optimising the Foreign Investment Environment and Increasing Efforts to Attract Foreign Investment (Opinions).[4] By following through the 24 points listed in the Opinions, the Chinese Government could go a long way towards improving business confidence.

At the start of this new year, the European Chamber is ready to deepen its engagement with Chinese stakeholders. We will continue to provide constructive recommendations that we believe will help China to realise its vast potential and achieve a sustainable economy.

[1] Fewer respondents (-6 percentage points (pp)) reported optimism about China’s growth prospects over the coming two years than in 2022, despite the fact that companies were surveyed after China’s ‘re-opening’. European Business in China Business Confidence Survey 2023, European Union Chamber of Commerce in China, 21^st June 2023, viewed 11^th January 2024, p. 8., <https://www.europeanchamber.com.cn/en/publications-archive/1124/Business_Confidence_Survey_2023>

[2] Over a third of respondents to the BCS 2023 ranked China’s economic slowdown as a top-three challenge that will have the greatest impact on their future business in China.

[3] European Business in China Business Confidence Survey 2023, European Union Chamber of Commerce in China, 21^st June 2023, viewed 11^th January 2024, p.31-32, <https://www.europeanchamber.com.cn/en/publications-archive/1124/Business_Confidence_Survey_2023>

[4] Opinions of the State Council on Further Optimising the Foreign Investment Environment and Increasing Efforts to Attract Foreign Investment, State Council, 13^th August 2023, viewed 11^th January 2024, <https://www.gov.cn/zhengce/content/202308/content_6898048.htm>