European businesses operating in China are facing increasingly challenging circumstances, with warnings from the European Union Chamber of Commerce that if China does not improve its trade environment, future trade between China and Europe could become a “one-way street”.
In a recent position paper, the European Union Chamber of Commerce highlighted the deteriorating operating environment for European businesses in China over the years. Without changes, the trade relationship between China and Europe could devolve into a “one-way street”. The Chamber called on Beijing to relax export controls, treat foreign enterprises fairly, strengthen market mechanisms and social security to alleviate concerns of foreign companies regarding economic slowdown and uncertainty.
The report also pointed out that as China continues to expand its trade surplus, European businesses are facing increasingly severe challenges. Particularly, Beijing’s export controls on some rare earth and related magnetic materials have led to production delays and large-scale shutdowns for European and other regional automotive manufacturers.
Although China and the EU reached agreements and commitments at the China-EU Summit on July 24th, there has been no change in the current situation. European businesses still face serious obstacles in obtaining rare earth export permits. Jens Eskelund, Chairman of the EU Chamber of Commerce in China, stated this at a press conference on Wednesday, September 17th.
Not long ago, the EU released a report regarding China’s “Made in China 2025” initiative, criticizing China’s hostile foreign investment environment and stating that excessive intervention by the Chinese Communist Party has led to market imbalances. The report recommended that China return to a market-oriented reform and opening-up approach, abandoning highly centralized and state-led industrial policies to create a fair competitive environment for both domestic and foreign enterprises.
The report warned that if China continues to pursue a policy of self-reliance that fosters exclusion, it will not only severely damage economic and trade cooperation between China and the EU but also jeopardize its own economic resilience and international reputation.
The EU Chamber of Commerce in China previously warned the Chinese authorities that without prompt adjustments to their industrial policies, they may face the risk of accelerating disengagement from the global market.
Despite several months passing, the clouds still loom over China-Europe trade relations. The EU Chamber of Commerce stated that complaints and requests for assistance from member companies have “significantly increased”.
Chairman Jens Eskelund mentioned that China continues to focus on full-speed exports while imports remain limited. If this imbalance persists, from the perspective of the EU Chamber of Commerce, trade between China and Europe could indeed become a “one-way street”. At that point, China’s trade partners may question, “What are we really gaining from this?”
Eskelund also stated, “Take the example of the United States (trade war). When trade imbalances swell to a certain extent, it eventually reaches a point that demands a response.” The resulting tariff conflicts have brought “unprecedented uncertainty” to both domestic and foreign businesses in China.