EU firms mull shifting out of China due to Covid-19 restrictions

Beijing, May 5 (EFE).- European business confidence has taken a hit in China due to stringent coronavirus restrictions, with some companies considering shifting current or planned investments to other markets, a new report said on Thursday.

The European Chamber surveyed how China’s Covid-19 policy and Russia’s war in Ukraine impacted European businesses in the Asian country.

“The results show both factors are creating severe challenges to European business operations, with logistics suffering the most overall,” the survey found.

Stringent lockdown measures in at least 45 cities imposed to contain the latest coronavirus outbreaks are causing massive uncertainty for businesses in China, said the report.

According to the survey, three-quarters of respondents report the measures had negatively impacted their operations, most acutely on logistics, warehousing, business travel, and the ability to conduct face-to-face meetings.

Supply chains have taken a pounding, both upstream and downstream, with 92 percent of companies being affected by measures like China’s recent port closures, decrease in road freight, and spiraling sea freight costs.

“Significantly, as a result of China’s Covid-19 policy, 23 percent of respondents are now considering shifting current or planned investments out of China to other markets – more than double the number that were considering doing so at the beginning of 2022,” the report said.

It is the highest proportion of Europeans considering shifting out of China in a decade.

Some seven percent are also considering shifting their investments due to the war in Ukraine, said the survey.

The report findings say that 60 percent of respondents have decreased their 2022 revenue forecasts.

Some 78 percent of respondents feel China is a less attractive investment destination due to its more stringent Covid-19 restrictions.

“Our members are willing to weather the current storm, but if the current situation continues, they will, of course, increasingly evaluate alternatives to China,” said Jorg Wuttke, president of the European Union Chamber of Commerce.

“A more expensive, functioning market is better than one that is relatively cheaper but paralyzed.”

Denis Depoux, global managing director of Roland Berger, said the uncertainty caused by the stringent Covid-19 policies impeded the ability of European companies to make sound business decisions in an overall deteriorating economic context due to the Ukraine war impact.

“A clearer crisis exit strategy would help maintain confidence in a European business community still highly committed to Chinese markets.” EFE


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