The EU-China Business Association organized an exclusive webinar on the key findings of the European Union Chamber of Commerce in China’s Business Confidence Survey (BCS) 2025 on 25 June 2025.
Ms. Gwenn Sonck, Executive Director, EU-China Business Association welcomed the participants to the webinar and introduced the topic and the speaker. This session provides a valuable overview of the current landscape for European business in China and examine how companies are adjusting their strategies in response to this fast evolving environment. The EU and China are deeply interdependent. Daily trade between the two exceeds €2 billion consistently. In 2024, Chinese investment in the EU almost matched EU investment in China. Chinese direct investment in the EU reached a total of €185 billion of accumulated investment, while European investment in China stood at €184 billion. In the first quarter of 2025, European FDI into China reached €3.06 billion, which is the strongest first quarter performance since 2022. So this really shows continued interest from European investors, even amid a broader slowdown of FDI into China and factors such as increased scrutiny in specific sectors. A more competitive business landscape are certainly influencing this trend.
Mr. Robert Jarvis, Policy and Communications Manager, European Chamber, presented the key Insights from the Business Confidence Survey 2025. The European Union Chamber of Commerce in China has offices across seven chapters and nine cities in mainland China, representing about 1,800 member companies. For the past 22 years, the European Chamber has been running a business confidence survey. The most recent survey was published on the 28th of May and based on a survey which was run between January and February of this year. The findings of this year's survey for many key metrics are very negative, and if we run the survey again at this moment, they would probably be even more so. The survey contains 48 questions across three core themes: company profile and financial performance, company's outlook on the Chinese business environment, members' outlook on company strategy, and five themes which generally change year-on-year in order to allow us to keep abreast of the most recent developments of the past year. The thematic questions for this year's survey were supply chains, the politicization of companies, digital and data, decarbonization, and Chinese industrial policy. This year the Chamber received 503 responses, which breaks down to a response rate of around 45% amongst eligible entities and is consistent with previous years.
The key finding of this year's business confidence survey is a warning: we seem to be on track for subdued business confidence becoming the new normal. It is not that European Chamber members are rushing to leave China, but we do see members increasingly opting to invest in other regions and take steps to silo and isolate their China and rest of the world operations. These are trends which have already been underway for a number of years. This year's survey found for the fourth year running record numbers of respondents reporting that doing business in China became more difficult. Higher levels reported this to be the case than in 2023, which was the period associated with the Shanghai lockdown. We are all aware of the sort of disruption that caused for businesses.
In terms of the drivers as to why this picture has deteriorated so much, one key factor is economic headwinds. We see record pessimism about the state of the Chinese economy as well the global economy. Key factors include challenges with profitability, deflationary and supply pressures, and high competition in many segments. We asked member companies whether they were optimistic or pessimistic about the state of competitive pressure in their sector and close to record levels reported pessimism. In tandem with China's economic slowdown, regulatory and market access barriers remain extremely widespread. A record number of member companies reported missing business opportunities as a result. One key difference this year compared to 2023 is that the restrictions faced by members are not attributable to one theme or event such as the Covid lockdowns.
In this year's survey, ambiguous rules and regulations ranked as the top obstacle members faced for the ninth consecutive year with China's unpredictable legislative environment, and market access and investment restrictions ranking as the second and third largest factors. At the industry level, the specifics vary. For healthcare equipment, 100% of respondents reported missing business opportunities in this year's survey, predominantly due to discrimination as a result of the “Buy China” public procurement practices, as well as strict import justification requirements for medical devices. If we look at IT and telecoms, three quarters missed business opportunities, predominantly due to localization demands and the push for the dominance of indigenous technology, which impacts their ability to win tenders at public procurement, and even private procurement, particularly for network equipment and telecommunication services. In financial services, members reported missing business opportunities due to specific factors such as limitations on carbon emission reduction facility bidding. Many members do not expect this picture to improve in the future, as 44% expect to see an increase in the number of regulatory obstacles faced over the coming half a decade.
So these factors are really culminating now in a situation whereby in tandem to China's economic slowdown and members facing longstanding market access and regulatory barriers, there is also now the increased politicization of business increasingly complicating the picture. This year's survey found that a majority of members experienced doing business in China becoming more political year-on-year. A second flash survey on the U.S.-China trade war in April 2025 found that many of the trends had been exacerbated as 52% reported a further increase in the politicization of the business environment in China following the start of 2025.
Other challenges are also increasingly making it more difficult for members to do business, such as conflicting legal regimes, including when it comes to EU legislation, and the ability for companies to reconcile the demands of EU legislation with the realities on the ground in China, such as the EU's corporate sustainability due diligence directive. This is also partly driven by the politicization of customer demands. A notable minority of members report simultaneously facing demands to cease their operations in sensitive regions of China, while also to continue them from the Chinese side. Members increasingly find themselves caught between a rock and a hard place. A majority of companies have seen business become more difficult again, following Trump's return to office.
Another emergent issue is carbon neutrality with members increasingly bound by aggressive, globally binding corporate decarbonization goals, often set by headquarters. Ensuring that their China operations can achieve carbon neutrality is an imperative when it comes to evaluating where and when, or if, to make new investments. One challenge is limited access to renewable energy, which is the top method Chamber members are employing in a bid to achieve carbon neutrality across their China operations. Other factors include a lack of guidance and best practices from local governments and NGOs, as well as a perceived lack of a low carbon culture in China. We see members either canceling their prior decarbonization objectives, or postponing their timelines for achieving decarbonization in China.
A growing share of Chamber members have now effectively turned to temper down their outlooks on the market. Members' outlook for profitability for the next two years in China is at the most pessimistic levels on record and this picture has deteriorated since the survey was conducted. In the Chamber's April 2025 flash survey we saw that optimism had decreased from 12% to 7%, while pessimism, when it comes to profitability, had increased by an additional nine percentage points. The same is true when it comes to growth. We also see members outlook on their ability to grow their China operations at the lowest level on record and having fallen substantially by 39 percentage points over the past four years. Companies are increasingly less profitable in China or more pessimistic when it comes to their future profitability in China at a time when the risks and challenges of doing business are proliferating. Many member companies are asking “why would you invest more in China or in growing your operations in China when this is increasingly challenging and there are increasing risks to do so when it comes to factors such as politicization, concerns relating to continued market access in the midterm, regulatory barriers, technological IP leakage, and so on, when you can effectively invest in other regions of the world which offer more predictability, reliability, and efficiency for the same or higher expected returns on investment. We now see members increasingly adjusting their China strategies and concluding that they require a strategic rethink. Record low percentages of Chamber members are currently planning to expand their operations in China. Just over one in three report plans to expand their China operations in 2025.
Additionally there is a disconnect taking place between companies' China operations and their headquarters, with many reporting this makes it more difficult for them to justify said investments. So 40% of respondents to this year's Business Confidence Survey reported experiencing decoupling between their European HQs and their China operations, and of that 40%, a further 40% reported that this decoupling has resulted in a reduced ability to capitalize on new projects or investment plans in mainland China. For just under one in seven, this led them to downsizing parts of their China operations or even to completely closing their China operations. We also see cost cutting amongst companies' China operations at record high levels. Just over half report plans to cut costs in China equal to last year and the main method is headcount reductions. The percentages of those reporting that China is a top destination for their present investments remain subdued at just under one in five, while roughly a fifth report not seeing China as a top 10 investment destination currently, which is really substantial when you consider the size of the Chinese economy. The percentage of China profits members were reinvesting is actually very, very limited. Approximately three quarters of Chamber members do reinvest profits earned in China in the Chinese mainland. However, the value of the profits being reinvested is very, very limited for the majority. For approximately 75%, it is less than 15% of their total China earnings. This is trending downwards in that approximately four in 10 report they expect to invest less in the future, while very few report plans to effectively grow their China reinvestments. We see members increasingly taking steps to shift parts of their operations away from China and also to silo and isolate the rest of the world in China operations. If we compare the findings in this year's survey to last year's, we see that last year, a large percentage of respondents reported that they were effectively on the fence about shifting investments away from China. Of those that were on the fence last year, a large percentage have now actually taken action.
Three quarters of respondents to this year's business confidence survey report having reviewed their supply chain strategies during the past two years, which is broadly consistent with previous years. What we see is increases in the number taking action, particularly when it comes to onshoring into mainland China. In tandem, we see approximately 13% taking steps to offshore parts of their China supply chains or to establish alternative supply chains outside of mainland China, effectively to serve the rest of the world. The key driver is a perceived need to build supply chain resilience and mitigate risks, although cost factors are also a major consideration for companies, as is geopolitical tensions.
Just to reiterate, what we see in this regard is not that Chamber members are essentially running for the exit when it comes to their China operations, but that they are increasingly beginning to take steps to separate and isolate their China operations, at least partially from their rest of the world operations, with the onshoring or offshoring of supply chains being one way to do this. This year's Business Confidence Survey is arguably the most pessimistic on record when it comes to a number of key metrics and we are increasingly seeing members take action as a result: downsizing investment plans, shifting investments to other regions, isolating their China and rest of the world operations, and so on. That said, while this obviously paints a very pessimistic picture, the Chamber believes it would be premature to write off the ability of the Chinese authorities to effectively turn the tide and restore European business confidence.
In terms of what it would take to turn the tide, and in terms of what the European Chamber is lobbying for in this regard, tangible improvements to the business environment is ultimately what's required, but in terms of how this could be achieved, key lobbying points for the Chamber at the moment are to be provided with full access to legitimate sources of economic data, and also with guarantees that doing what may be considered standard due diligence practice is permissible in that it doesn't violate the terms of China's national security related legislation. We are also advocating for comprehensive implementation of recent measures aimed at restoring investor confidence. Chief among that would be the full implementation of the State Council's 13th of August, 2023, 24 points, and finally, guarantees that European companies in the future will have full room to fully contribute to China's economy, Mr. Jarvis concluded.
A Q&A session followed Mr. Jarvis's presentation.
Mr. Jochum Haakma, Chairman, EU-China Business Association, presented the concluding remarks. Looking at China and at all the misinterpretations and the very negative media attention, Mr. Haakma said that he was happily surprised coming from noisy Hong Kong, arriving in Shenzhen or in Guangzhou, that the most eerie thing is that it is dead quiet, because all the transport is electric. European people don't understand that in so many sectors China is very well ahead, especially in the electrification and in the environment. On the other hand, in public procurement, there is much more localization going on, and there is a very difficult competition for foreign investors. After the years of Covid, we expected the situation to improve, but actually there was an enormous financial real estate crisis in China. In Hong Kong and in China, company headquarters always had a very big problem to get a good view and insight of the local situation. CEOs of foreign companies in China are advized to assign somebody in the board to be responsible for China, because rules and regulations and developments go so fast that a direct contact with the headquarters is needed to be able to decide very, very quickly. Is that still the case? Because that was my advice and even some big companies assigned a special person in the board who is responsible for China.
Mr. Jarvis: If we can give you one key takeaway at the corporate level from the presentation, it's that you really need to invest in strengthening ties between your China operations and your operations in the rest of the world. On the one hand, doing business in China is becoming increasingly difficult. It's increasingly dynamic as well at the political level, at the regulatory level, and this poses hurdles for many companies. And so the solution to that is you really need to invest in intelligence and in connections, be it working with Chambers of Commerce, think tanks, research institutes, and sectoral business level associations, and you really need to understand the specifics when it comes to your industry and your product, both upstream and downstream.
