Business & Economy

China is putting ideology before economy: European companies

Shanghai, China, Sep 21 (EFE).- China is putting ideology before economic growth and is “moving away” from the rest of the world, something that could cloud the environment for business, the country’s European Union Chamber of Commerce said n its annual report, Wednesday.

The dossier, entitled ‘Ideology prevails over the economy,’ said that this last year has brought about an “important change” in the way in which European companies evaluate China, moving the focus from investment opportunities to other aspects. These include the resistance of supply chains, the difficulty of doing business or possible reputational risks.

The companies that operate there, the chamber said, are facing increasing public pressure in their countries in terms of transparency, and recently passed laws that require them to demonstrate, for example, that their supply chains are free from forced labor.

The firmer stance of Western governments towards China is due to public opinion that is increasingly critical of Beijing in many countries, which “increases the chances of problems of communication and understanding.” This is added to the fact that ” It is not possible” for Chinese leaders to understand Europe better than before Covid-19 due to their “self-imposed quarantine.”

“Europe and China (…) are moving further and further away. The rest of the world has already returned to pre-pandemic levels of ‘normality,’ but China remains reluctant to reopen its doors,” said Jorg Wuttke, president of the European business club.

Likewise, the EU is “re-evaluating and updating” its political position, “taking more seriously” the messages that come from Beijing, among which the Chamber cites the self-sufficiency campaign announced in the face of geopolitical tensions with the West. This makes European companies “analyze the risks very carefully” for fear of becoming “victims of a political dispute.”

Internally, the big problem that European companies continue to point out in China is the Covid-19 zero tolerance policy, which has resulted in strict confinements in various parts of the country, an almost total closure of borders and obstacles for business. This has led to “puzzling” regulations for quarantine or disinfection of packages from abroad.

This situation “has given an additional boost to the exodus of foreigners (…) that was already underway,” said the Chamber, speaking of a “devastating effect” on the attraction and retention of talent to work in China and of a “greater isolation” of the personnel who are in the country, who cannot travel to the headquarters of their companies.

The report said China would likely not reopen its borders until at least the second half of 2023.

It also said company directors are not being able to have “first-hand experience” in China, which reduces their understanding of the country and their interest in it: “They will be increasingly reluctant to commit to invest in a country they understand less and less about, especially as they perceive increased political, economic and reputational risks.”

The organization calls on China for “more transparency and predictability,” since, despite the fact that the country “still has significant growth potential and manufacturing bases and world-class industrial poles that are difficult or even impossible to replicate elsewhere”, the commitment of European firms “can no longer be taken for granted.”

As an example, the report cites official Chinese statistics showing that while foreign investment in the country increased in 2020, that from the EU fell by 11.8 percent year-on-year, and that the proportion of European capital inflow over The total fell to 3.8 percent from its all-time high of 11.1 percent, recorded in 1999. EFE


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