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European Companies Report Optimistic Outlooks

Three-quarters of the European companies operating in China are either making a profit or are breaking even, according to the recently released European Chamber Business Confidence Survey, conducted by the European Union Chamber of Commerce and Roland Berger Strategy Consultants.

The report was based on a survey of 200 European companies. It reveals that despite increasing labour costs, European businesses are generally optimistic about their business performance in China. Their optimism is mostly based on the continuing strength of China’s economic development and the resulting growth in domestic consumption.

“EU companies are doing well in an increasingly competitive business environment. In comparison with last year’s survey, there is a stronger focus both on establishing research and development (R&D) programmes and on expanding investment,” Joerg Wuttke, president of the European Chamber, said during a media briefing.

Charles-Edouard Bouee, managing director of Roland Berger Strategy Consultants in Greater China, said: “The optimism with business performance is not surprising. To a great extent, it reflects the experience of our European clients operating in China, who are confident of remaining profitable in the coming years.”

The broad market in China, enhanced by the robustly increasing disposable incomes of the Chinese, is a key incentive for European companies, since more than 80 percent of the respondents indicated they were in China primarily to access or serve the Chinese market.

The companies reported a shift in their model for investment: 31 percent of the surveyed companies with more than 100 employees have already established R&D centres in China; 32 percent want to open or enlarge their R&D facilities in the next two years. There is also a trend for companies to shift their sales and service centres, from first-tier to second- or third-tier cities.

But, access to trained personnel is a major problem for European companies. The localization of top management is not progressing as quickly as expected, and recruiting and retaining qualified staff is also a challenge.

In addition to the shortage of qualified personnel, environmental hazards, insufficient protection of intellectual property rights and delays in implementation of World Trade Organization treaty commitments are concerns of European companies, according to the survey.