On the occasion of the first European Union Chamber of Commerce in China (European Chamber) business delegation visit to Brussels in three years, the EU-China Business Association, the European Chamber and BusinessEurope organized the conference “European Business in China Post-2022: The View from the Ground”. Attendees had the opportunity to learn from European business representatives operating on the ground in China what the key drivers behind these trends in China are and their implications for European business.
Ms. Luisa Santos, Deputy Director General, BusinessEurope, gave the opening remarks, saying we were facing a very challenging environment after everything that happened. With the zero-Covid strategy the contacts and dialogue had become much more difficult. When we are not able to see each other in person, this makes things more difficult. We are happy to see that China is now changing from a very strict Covid-policy to opening up. But we do not know the numbers of people being infected and dying and this is concerning. Now some other countries are imposing restrictions on people coming from China. We need to see if the current situation in China will impact supply chains around the world. The other major challenge is related to the war in Ukraine in which China has been quite ambiguous, more allying with Russia at least politically. The U.S. is seeing China as a rival economically, but also technologically. Rivalry is becoming more and more pronounced.
In 2020 we were going to open a new era in China-EU relations, but everything changed with the sanctions related to Xinjiang and the reaction from China. There is much discussion in Europe about China policy and this is a challenge. The alignment with the U.S. should be jointly decided and not imposed by one side. The major challenge is that the EU will be compelled more and more to align with the U.S. There will be more discussions about mutual investment between Europe and China.
Mr. Joerg Wuttke, President, European Union Chamber of Commerce in China, gave a presentation on the current business environment in China. After three years of online meetings it is wonderful to have a delegation coming to Brussels for contacts with the authorities, the Chinese Embassy, European Parliament and European Commission. Our Position Paper has been put together by 35 working groups with 400 pages of recommendations. We believe that China can still reform, otherwise we would not do this exercise. We hope that next year there will be less recommendations as China starts walking the talk of opening up instead of making cosmetic changes. The world has changed and is not waiting for China to open itself up. Ideology trumps the economy and we are concerned that China will become less predictable, reliable and efficient. At the 20th Communist Party Congress, President Xi Jinping mentioned Marx 15 times and markets three times. We need China to firmly open up. Some companies are looking for opportunities elsewhere.
European investments in China in 2021 were less than €10 billion and the tendency for 2022 was much better, courtesy of one company that invested €3.9 billion, but investments from other companies declined. EU companies invested €60 billion in the U.S. in 2021. In the U.S., it is mostly acquisitions, while in China investments are mostly in greenfields. In the first 10 months of 2022, China exported 5 million 40-foot containers to the EU, which means European consumers created 16 million jobs in China. Going from Europe to China, there were 1.5 million containers. This shows were things are headed. China is a huge economy but a very small market for us, so China still has a lot of potential and has it in his own hands to realize that potential.
The Covid situation has to be better managed. They can learn particularly from New Zealand and Taiwan. Economic prospects for the first quarter of 2023 will be very bad, whereas the first quarter of 2022 was very good. But the service sector is picking up with more traffic and travel. The second and third quarter will be better, so you have a good data set. GDP growth will probably be 5%. Our Position Paper indicates the potential of China.
A panel discussion with industry representatives from the European Chamber followed Mr. Wuttke's presentation. Participating in the panel discussion, moderated by Mr Davide Cucino, Brussels Representative of the European Union Chamber of Commerce in China, were Mr Zhonghua Xu, Chair Energy Working Group, TotalEnergies; Mr Raphael de Garnier, Chair Pharma Working Group, Sanofi; Ms Susan Gao, Vice-Chair Banking and Securities Working Group, Landesbank, and Ms Renata Pavlov, Member State Representative and Member of the Maritime Manufacturing Working Group, Fincantieri.
Following is a brief overview of the topics discussed:
• Mr Xu emphasized the importance of developing the ecosystem in the energy sector between Europe and China. China must speed up its transition from coal to gas and be more creative in renewables. We need to innovate faster and shorten the distance from R&D to business. We have to be more flexible to develop a new business model with China.
• Mr de Garnier said most of the innovation is still coming from multinationals. During the pandemic we focused on the continued supply of medicines. Now there are again shortages in raw materials and production capacity.
• Ms Gao said also the financial sector has gone through a period of limited business activities and low levels of social connectivity. More projects have been postponed or canceled because investors are reluctant to invest. We also see positive progress for the opening up of the financial market, but the sector is strictly controlled by the government. We are still pushing for fair market access and equal treatment.
• Ms Pavlov explained that the maritime industry has seen an unprecedented growth coming from a low base. For European companies it is not easy to exploit the potential because there is no clear roadmap. The industrial cycle is very long and it is not clear which technology will be used.
A Q&A session followed the panel discussion.
Mr Kurt Vandeputte, Vice Chairman of the EU-China Business Association (EUCBA) and Chairman of the Flanders-China Chamber of Commerce (FCCC), delivered the closing remarks. He said that we are at a huge moment in EU-China relations. Our members are concerned about the unknown and the region's complexity. Twenty years ago it was easy to go to China because there was little risk if you accepted the cultural differences. In the last three years this situation has changed completely. Our members are still attracted to China but they are facing the complexity of the market. Most are in China for China. China is a market which cannot be ignored. Now complexity is increasing and this also increases the role of our organization. In doing business with and in China in the past 20 years, I made many Chinese friends and the past three years were as painful for them as for us. There is a difference between multinationals and SMEs. They have been disconnected from their industrial and customer relations in the past three years. That is the drama. This is not the case for MNCs which have local management.
