European Business in China Business Confidence Survey 2026

Is business confidence approaching an inflection point?

The European Chamber’s Business Confidence Survey (BCS) 2026 raised the possibility that subdued expectations and increased challenges were at risk of becoming entrenched, based on the fact that confidence in China’s business environment had been continuously deteriorating for several years.[1] Many key metrics were at or around historic lows last year,[2] and two-year outlooks were overwhelmingly pessimistic, particularly regarding profitability, growth and competition.[3]

There are signs in this year’s survey data, however, that certain trends may now be bottoming out and, if the right policies are implemented, business confidence could begin to meaningfully improve in several areas.

The intensity of the deterioration of confidence in China’s business environment has eased for several key metrics year-on-year (y-o-y) for the first time since the country ended its zero-COVID policy:

A decrease was recorded in the percentage of respondents reporting that the business environment had become more difficult over the previous 12 months (68%, -5 percentage points (pp) y-o-y).
For the first time in five years, less than half (47%, -5pp y-o-y) of respondents reported that China’s business environment had become more politicised compared to the previous year.[4]
The trend of members postponing decarbonisation targets in China due to practical challenges seems to have paused.

In other areas, some improvements were seen:

There has been an uptick in optimism for the profitability outlook for the coming two years (17%, +5pp y-o-y), after record low levels had been reported in the BCS 2025.
A 9pp improvement was recorded in the proportion of respondents reporting missed business opportunities due to regulatory or market access barriers (54%).
There has been an increase in the percentage of respondents reporting a level-playing field in their industry (60%, +4pp y-o-y).

Some of these gains could be attributed to the fact that, in a year of intense global volatility, China has demonstrated itself to be a relatively stable investment destination. However, this should not obscure the fact that several key challenges remain, including the following:

China’s economic slowdown and the persistence of irrational and unsustainable competition in certain industries (i.e., ‘involution’).
Regulatory and market access barriers, the lack of a level playing field for foreign-invested enterprises (FIEs) operating in many sectors, intellectual property rights (IPR)-related issues and challenges with cross-border data transfers.
Difficulties decarbonising operations, including a lack of access to reliable sources of renewable energy and the need for comprehensive industrial guidance.
Supply chain pressures, including those exerted by China’s export control regime, and the need for businesses to comply with new and forthcoming globally binding legislation from other markets, including the European Union (EU).
The politicisation of business, much of which stems from heightened EU- and United States (US)-China tensions.

China could capitalise on a volatile global environment…

Last year’s BCS cautioned that a failure to meaningfully address key challenges in China’s business environment could open the door for other markets to court foreign direct investment at its expense.[5] While this remains the case, the more unpredictable global environment that has emerged over the past year has presented the opportunity for any market to demonstrate and take advantage of its strengths, among which the capacity to provide a stable and predictable market has emerged as one of the most important. Although China has some way to go in this regard, it does have a strong foundation to build upon:

It remains important for global company revenues, accounting for >15% of companies’ global revenues for 38% of respondents (+3pp y-o-y).
It has a dynamic R&D ecosystem and is highly competitive, with more members (48%) now reporting Chinese firms in their industry as more innovative than European (24%) ones.
The country is the heavyweight champion of highly efficient and cost-effective supply chains: 75% of respondents categorise their China production as more efficient than their production in the rest of the world; and 94% see the market as important for sourcing.

These factors present many company headquarters (HQs) with persuasive arguments as to why they might consider expanding their China footprints. However, such decisions are made over a multi-year horizon, and—as alluded to—companies are now placing a premium on predictability and stability when viewing potential investment opportunities, while also closely monitoring China’s policy priorities through the lens of its national, local and sectoral development plans.

…but reforms needed across all industries for a meaningful rebound in business confidence

It is positive that recent high-level policy documents, most notably the 15^th Five-year Plan (15FYP), have stated the need for China to transition to an economic model predicated on sustainable, quality growth, rather than growth at all costs.[6] Other positive signals in the 15FYP include calls for: national treatment for FIEs; measures to address ‘involution’; domestic consumption to be boosted; and the “balanced development of imports and exports”.[7] Achieving these aims will be key to addressing some of the underlying structural challenges previously listed. It would also provide a business environment that is open and fair for all companies, while reducing bilateral tensions with key trading partners, including the EU.[8]

At the same time, the 15FYP doubles down on calls to increase self-reliance, which up until now has been largely propelled by industrial policies designed to support and protect Chinese companies operating in strategic areas of the economy.[9] This has negatively impacted European players in these sectors: due to stringent localisation requirements—even down to the component level in some industries—and discrimination in procurement processes, a high proportion of companies have missed business opportunities and suffered a loss of market share, with some having to exit the market. It will be important to rectify this if business confidence is to be restored across the board rather than limited to non-strategic industries.

Creating momentum by plucking low-hanging fruit

In addition to the fact that fully addressing structural challenges facing China’s economy will take many years, the reform process will also at times be constrained by the need to balance internal development against external challenges, such as the fallout from rising geopolitical tensions and headwinds facing the global economy. It would therefore be prudent to introduce pro-business policies that can bring ‘quick wins’ and provide the impetus for a sustained rebound of business confidence, while simultaneously addressing the more systemic issues.

This could start, for example, by optimising the many administrative processes that are currently impeding FIEs’ operational efficiency, many of which are within the remit of local authorities to address. While they could be considered less significant than the more structural issues, they are relatively easier to manage and solving them would have a disproportionately positive impact on the business environment. This could include: improving processes for obtaining construction permits; increasing access to credit/funding, particularly for small and medium-sized enterprises (SMEs); eliminating inter-district and inter-provincial roadblocks for companies that need to relocate operations; providing greater protection for minority investors; committing to regular, high-level (mayor or vice mayor) government-industry dialogues to provide a channel for open, two-way communication with chambers of commerce and company representatives; and increasing the frequency of policy consultations with industry, including FIEs, among many others.

There are other challenges that would require national-level intervention and/or coordination with local governments to implement reforms, but which are still more manageable relative to the systemic challenges in China’s economy. These include: implementing clear and transparent export control licence application processes and rolling back plans to implement extraterritorial controls on EU companies; enhancing the clarity and consistency of China’s data governance regime, including by streamlining cross-border data transfer procedures and ensuring a proportionate definition of ‘important data’ that can enable global data flows; and facilitating the processes for both cross-border money transfers and cross-border trade.

By plucking some of these ‘low-hanging fruit’, China would demonstrate its commitment to improving the market, which would help to build the momentum needed for a full rebound of business confidence.

Robert Jarvis is senior policy and communications manager at the European Chamber, was the lead pen on this year’s Business Confidence Survey.

[1] European Business in China Business Confidence Survey 2025, European Union Chamber of Commerce in China, 28^th May 2025, viewed 20^th March 2026, <https://www.europeanchamber.com.cn/en/publications-business-confidence-survey?alichlgref=https%3A%2F%2Fwww.europeanchamber.com.cn%2Fen%2Fpress-releases%2F3717>

[2] A record high 73% of respondents to the BCS 2025 reported that doing business in China become more difficult y-o-y; a record 68% reported missing business opportunities due to market access or regulatory barriers in the year leading up to the survey; and a record low 38% of businesses reported plans to expand in China, a reflection of the increased difficulty of doing business.

[3] A record low 12% of respondents to the BCS 2025 reported being ‘optimistic’ about their profitability outlook for the coming two years, a figure that dropped to 9% when it came to optimism about competitive pressure. Meanwhile, only 29% were optimistic about the growth outlook over the same timeframe, also a historic low.

[4] 41% of respondents to the BCS 2021 said business had become ‘much more politicised’ or ‘somewhat more politicised’ in response to the question, ‘Has the business environment in China become more politicised in the last year?’; 50% said the same in BCS 2022; 59% in the BCS 2023; 55% in the BCS 2024; and 52% in the BCS 2025.

[5] European Business in China Business Confidence Survey 2025, European Union Chamber of Commerce in China, 28^th May 2025, viewed 20^th March 2026, <https://www.europeanchamber.com.cn/en/publications-business-confidence-survey?alichlgref=https%3A%2F%2Fwww.europeanchamber.com.cn%2Fen%2Fpress-releases%2F3717>

[6] The 15FYP calls for the country’s policymakers to “achieve prominent results in terms of high-quality development”, as well as noting that GDP growth should be kept “within a reasonable range”. See: Outline of the 15^th Five-year Plan for National Economic and Social Development of the People’s Republic of China, Xinhua, 13^th March 2026, viewed 23^rd March 2026, <https://www.gov.cn/yaowen/liebiao/202603/content_7062633.htm>

[7] Ibid.

[8] These calls also represent an acknowledgement of some of the key factors weighing on European business sentiment. See: EUROPEAN CHAMBER’S STANCE ON CHINA’S 15^th FIVE-YEAR PLAN, European Union Chamber of Commerce in China, 13^th March 2026, viewed 23^rd March 2026, <https://www.europeanchamber.com.cn/en/press-releases/3776/european_chamber_stance_on_china_s_15th_five_year_plan_>

[9] For the last more than a decade, the primary focus has been on industries identified as strategic under the Made in China 2025 (MIC2025) industrial policy. These include next generation IT; high-end numerically controlled machinery and robots; aerospace and aviation equipment; maritime engineering equipment and high-tech maritime vessel manufacturing; advanced rail equipment; energy saving vehicles and new energy vehicles; electrical power equipment; agricultural machinery and equipment; new materials; and biopharmaceuticals and high-performance medical devices. Under the umbrella of ‘new quality productive forces’, China’s key industrial policy looks set to maintain many of the core principles of MIC2025 while expanding the number of industries in focus.