Confidence of EU Companies in China Drops to Historic Low: Survey

The confidence of European companies operating in China has dropped to a record low, according to an annual survey, with respondents citing China’s economic downturn and rising geopolitical tensions.

In the European Union Chamber of Commerce in China’s 2025 Business Confidence Survey published on May 28, a record 73 percent of the 503 respondents said that it’s more difficult to do business in China. The survey of 503 chamber members was conducted in January and February, which was before the tariff war escalated in April.

Only 5 percent of EU companies believed that the situation had improved, which is the lowest since the survey was first conducted in 2011.

Twenty-nine percent of respondents reported optimism about their growth prospects in China over the coming two years. Only 12 percent of respondents are optimistic about future profitability in China over the next two years, falling by 3 percentage points from last year. Both numbers are historical lows.

Meanwhile, a record-high 49 percent of respondents expressed pessimism about future profitability in China in the coming two years.

In addition, 60 percent of the surveyed companies expressed pessimism about future competitive pressure, indicating that the Chinese market’s attractiveness to foreign-funded enterprises is declining.

“Uncertainty resulting from escalating trade and geopolitical tensions, concerns about China’s domestic economy and persistent producer price deflation weigh on the minds of both European and Chinese companies,” Jens Eskelund, president of the European Union Chamber of Commerce in China, said about the survey results.

A record 63 percent of respondents said they missed business opportunities in China last year due to market access restrictions and regulatory barriers.

Among the surveyed companies, 44 percent believed that it was difficult to achieve fair competition between foreign and local companies, indicating that institutional inequality is still serious in China.

The report describes the Chinese market as “one economy, two systems.” In particular, in sectors such as information technology, medical devices, and law, foreign companies have long been constrained by localization requirements and compliance uncertainties. In addition, EU Chamber of Commerce members generally have concerns that China’s public procurement policies have a buy-domestic-products orientation that is unfavorable to foreign companies, further compressing the operating space of foreign companies, according to the survey report.

“Our key message to policymakers is: the disparity between supply growth and demand is eroding both profits and business confidence. Achieving a better balance will not only benefit companies and make China a more attractive investment destination but may also lead to a reduction in trade tensions,” said Eskelund.

U.S.-based economist Davy J. Wong told The Epoch Times that the EU Chamber of Commerce survey reveals “a profound decline in business confidence among European firms operating in China, which reveals it is fundamentally a breakdown in systemic trust.”

It is due to “the increasing unpredictability of China’s regulatory and political environment,” Wong said, as the EU companies don’t know “if today’s rules will still apply tomorrow.”

In addition to the Chinese regime’s increasing regulatory opacity, Wong said that “rising political alignment with authoritarian regimes such as Russia, Iran, and North Korea” and the “threats to intellectual property and energy transition leadership” have also contributed to the EU companies’ declining confidence in doing business in China.

Frank Xie, professor of business at the University of South Carolina Aiken, told The Epoch Times on May 28 that “foreign companies are losing confidence because the Chinese economy is declining.”

He noted that, unlike American companies that produce goods in China and export them to the United States, “many European companies come to produce and sell goods in China.”

“So Europe is somewhat dependent on China as an export market, and they produce in China,” Xie said.

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Employees work on the assembly line during a construction completion event at the SAIC Volkswagen MEB electric vehicle plant in Shanghai, China, on Nov. 8, 2019. Aly Song/Reuters

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However, the survey also found that 26 percent of respondents reported further onshoring of their supply chains into China, which is a 5 percent increase year-on-year.

Wong said that this move by the 26 percent of surveyed companies “should not be misread as a vote of renewed confidence.”

“Rather, it reflects a tactical recalibration,” he said.

He said that “re-shoring to China offers short-term cost and efficiency advantages, which acts as a buffer system for global volatility.” However, in some cases, he added, “it signals a pre-exit consolidation—a repositioning, not reinvestment.”

Wong said the survey shows that “the real transformation underway is a silent decoupling.”

“Firms are not ‘leaving China’ entirely, but rather adopting a layered architecture: China for revenue, Southeast Asia for manufacturing, and Europe for IP and geopolitical insulation.”