European Business in China Position Paper 2021/22 Launched Today

The European Union Chamber of Commerce in China today released its European Business in China Position Paper 2021/2022 (Position Paper), its most important publication and the cornerstone of its annual advocacy plan. Compiled by its 35 working groups and sub-working groups over a six-month period, the 930 constructive recommendations contained in the Position Paper illustrate both the depth of the challenges faced by European companies in China and their commitment to improving the business environment.

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Despite the many difficulties experienced in 2020, due to the COVID-19 pandemic and increasing geopolitical tensions, European businesses in China did well overall, and remain firmly committed to the market. However, while business opportunities still remain, signs that China is turning inward—as can be seen in its 14th Five-year Plan’s (14FYP’s) aim to increase self-reliance, and even achieve self-sufficiency, in parts of the economy—are a real cause for concern. European companies are unsure about the extent to which they will be able to contribute to China’s future growth, with some fearing market exit, and there are now doubts over China’s future growth trajectory.

When Beijing first embarked upon bold reforms in the late 1970s, its economy was propelled forward at breath-taking speed. In the intervening four decades, however, reforms have vacillated as Beijing has struggled to solve the contradiction between achieving growth and maintaining control over the economy. The solution that appears to have been settled upon in order to address these seemingly irreconcilable propositions is ‘dual circulation’ theory—the core of the 14FYP—adherence to which will require China to deviate from the spirit of the 1970s reform and opening as it increasingly relies on its own companies to service its vast domestic market.

While China seems to currently accept the costs of pursuing such a course, the European Chamber believes that the damage it will cause to China’s economy in the long-run will not be acceptable.

“The European Chamber is concerned that China’s economy will continue to underperform if it steers away from bold reforms in favour of a more insular approach,” said Joerg Wuttke, president of the European Union Chamber of Commerce in China. “Our member companies play a pivotal role in China’s economy, and the 930 constructive recommendations they provide in this report are aimed at developing an optimal business environment that will allow China to reach its full economic potential.”

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