Report: European business outlook on China sours

By Steve Toloken
Staff Reporter / Asia Bureau Chief

Published: May 30, 2013 12:33 pm ET
Updated: May 30, 2013 12:45 pm ET

Related to this story

Topics Europe, China

The outlook for European businesses in China has soured, with a “clear downturn” on profitability and uncertainty about whether China’s leaders can seriously address needed economic reforms, according to a report from the largest European business group in China.

In a May 30 report released in Beijing, the European Union Chamber of Commerce in China said profitability for its member companies there has declined to an all-time low, and it said they are unsure if China’s leaders have the political will to “seriously” address needed economic reforms.

“Pressures from increasingly challenging market and economic conditions in China, which are exacerbated by a regulatory environment that continues to be demanding and at times discriminatory, have led to a clear downturn in profitability and revenue growth for European companies,” the chamber said in its annual Business Confidence Survey.

The report is compiled with input from 550 European companies operating in China.

“Despite increasing rhetoric from senior Chinese leaders that efforts will be undertaken to transform and level the regulatory environment through allowing greater play to market forces, European companies have so far perceived few concrete changes,” said chamber President Davide Cucino, in a statement. “Financial performance is worsening and optimism about profitability is at its lowest ebb.”

The Chamber said its companies identified promoting greater rule of law as the most notable of the reforms that could drive additional economic growth in China.

It said the companies reporting revenue growth in China decreased to 62 percent of the respondents, with the number reporting profitability growth declining to 44 percent.

The biggest factor hurting profits, it said, was rising labor costs, along with slower growth in both China and Europe and more competition. It said the situation was aggravated by a “discriminatory” regulatory environment for European business.

“Market access is the key concern,” the report said. “Approximately half of European companies noted missed business opportunities due to market access and regulatory concerns, thus challenging the government’s assertion that China has a level playing field.”

Still, the report said the companies see China as an increasingly important market and increasingly important to their global strategies. More than 70 percent remain optimistic about growth prospects in China and 86 percent are planning further investments, the chamber said.

The European report on business conditions is similar in its conclusions to one issued in February by the American Chamber of Commerce in Shanghai, although the American report takes a less pessimistic tone.

Like the Europeans, the American report pointed to a tougher business environment — the second straight year that profits, revenues and margins in China dropped — and it pointed to a jump in the number of U.S. companies complaining about uneven enforcement of laws that benefitted Chinese companies.

The “perhaps most concerning” conclusion was that, for the third straight year, two-thirds of American companies found the legal and regulatory environment either getting worse and staying the same, the report said.

Still, the report said more than 90 percent of U.S. companies were either optimistic or slightly optimistic about their five-year business plans in the country, because of rising personal incomes, up nearly 10 percent last year, and domestic consumption that is expected to triple in the next 20 years.

The American group said generally speaking U.S. companies have carved out positions in the mass market consumer goods sectors, while it said European firms tend to dominate luxury goods markets.


Comments

Report: European business outlook on China sours

By Steve Toloken
Staff Reporter / Asia Bureau Chief

Published: May 30, 2013 12:33 pm ET
Updated: May 30, 2013 12:45 pm ET

Post Your Comments


Back to story


More stories

Image

Sinopec licenses PP technology to USA, posts half-year results

August 26, 2014 11:46 am ET

China's state-owned petrochemical giant Sinopec Corp. said it is licensing polypropylene polymerization technology to a U.S. plant for the first time ...    More

Image

Romania's biggest PVC processor adding capacity, product lines

August 26, 2014 10:07 am ET

Romanian plastics manufacturer Teraplast SA has unveiled plans to invest 1.3 million euros ($1.7 million) this year to expand its output capacity and ...    More

Image

Sonoco buys Germany's Weidenhammer, plans for thin-walled packaging growth

August 25, 2014 1:41 pm ET

Sonoco Products Co.'s acquisition of Weidenhammer Packaging Group GmbH of Germany includes plastic packaging technology that the company is targeting ...    More

Image

Deceuninck buys PVC window maker Pimas, adds capacity in Turkey, Russia

August 25, 2014 2:26 pm ET

European building products manufacturer Deceuninck Group has acquired 81.2 percent of Pimas Plastik Insaat Malzemeleri AS, the leading PVC window...    More

Image

Japan's DIC planning PPS compounding plant in China

August 25, 2014 1:28 pm ET

Japanese materials firm DIC Corp. plans to open its first polyphenylene sulfide (PPS) compounding plant in China by the end of 2015.    More

Market Reports

Thermoformed Packaging 2014 Market Review & Outlook North America

This in-depth report analyzes economic and market trends, legislative/regulatory activity impacting supply and demand, business opportunities and threats, materials pricing, manufacturing technology, as well as growth strategies being implemented by thermoformed packaging companies.

Learn more

Pipe, Profile & Tubing Extrusion in North America 2014

U.S. demand for extruded plastics is expected to grow by 3 percent in 2014, with PVC remaining the largest segment.

Plastic pipe will post the strongest gains through 2018, continuing to take market share from competing materials in a range of markets.

Our latest market report provides in-depth analysis of current trends and their financial impact on the pipe, profile and tubing extrusion industry in North America.

Learn more

2014 Injection Molding Industry Report

GROWTH, OPPORTUNITY IN SIGHT FOR INJECTION MOLDERS IN 2014

In the wake of the economic turbulence earlier in this decade, molders today find themselves in much better shape. Molders are gaining a competitive advantage by investing in people, equipment and seeking inroads into new markets on a global scale.

Growth in the injection molding industry is going to be driven by low financing costs and a continued move to reshore some business.

Learn more

Upcoming Plastics News Events

September 10, 2014 - September 12, 2014Plastics Caps & Closures 2014

January 14, 2015 - January 14, 2015Plastics in Automotive

February 4, 2015 - February 6, 2015Plastics News Executive Forum 2015

More Events