EU businesses ‘questioning their position’ in China: trade commissioner

BEIJING, CHINA — European businesses in China are increasingly questioning their positions in the face of tough new security laws and a politicisation of trade, an EU commissioner warned in Beijing on Monday.

“European companies are concerned with China’s direction of travel,” Valdis Dombrovskis said in a speech at the capital’s Tsinghua University.

“Many are questioning their position in this country.”

He pointed to a new foreign relations law and a recent update to China’s anti-espionage laws as being of “great concern to our business community”.

“Their ambiguity allows too much room for interpretation,” he warned.

“This means European companies struggle to understand their compliance obligations: a factor that significantly decreases business confidence and deters new investments in China,” Dombrovskis said.

The EU trade commissioner is on a multi-day visit to the world’s second-biggest economy, where he is set to meet senior economic officials and press the bloc’s case that it is not seeking an economic decoupling from China.

His trip follows a report by the Chamber of Commerce of the European Union last week that showed business confidence was at one of its lowest levels in decades.

“For decades, European companies thrived in China,” the Chamber’s president Jens Eskelund said.

But, after three “turbulent” years, he said, “many have re-evaluated their basic assumptions about the Chinese market”.

And it comes in the face of mounting trade tensions between the EU and China, following Brussels’ decision to launch a probe into Beijing’s electric car subsidies.

The investigation could see the EU try to protect European carmakers by imposing punitive tariffs on vehicles it believes are unfairly sold at a lower price.

The day after that announcement, the Chinese commerce ministry hit back at the EU’s “naked protectionism”, and said the measures “will have a negative impact on China-EU economic and trade relations”.

Speaking in Beijing on Monday, Dombrovskis insisted China remained an attractive investment opportunity for European businesses.

“The EU and China both benefited immensely from being open to the world,” he said. “Trading and cooperating across borders helped to shape our economic and geopolitical strength.”

But, he said, growing challenges for business risked turning “what many saw as a ‘win-win’ relationship in past decades could become a ‘lose-lose’ dynamic in the coming years”.

Ukraine war

China’s refusal to condemn Russia’s war in Ukraine also poses a “reputational risk”, he said.

Beijing’s position “is affecting the country’s image, not only with European consumers, but also businesses”, he said.

China has sought to position itself as a neutral party in the Ukraine conflict, while offering Moscow a vital diplomatic and financial lifeline as its international isolation deepens.

Russian leader Vladimir Putin is due to visit China next month.

“China always advocates for each country being free to choose its own development path,” Dombrovskis said.

“So it’s very difficult for us to understand China’s stance on Russia’s war against Ukraine, as it breaches China’s own fundamental principles.”

— AFP