(Yicai) Nov. 13 -- Eighty-one percent of Chinese companies operating in the European Union said they face “rising uncertainty,” with the bloc’s business environment rating falling for the sixth straight year, according to a new report by the China Chamber of Commerce to the EU.

Chinese firms see increasing politicization of commercial issues, as the EU's intensive roll-out of regulatory policies has left many of them struggling to navigate the “compliance maze,” making long-term business planning difficult, according to the report titled Weathering Challenges, Sharing Success. They gave the EU business environment a rating of 61, down from 73 in 2019.

The report, the seventh annual flagship study by the CCCEU and global consultancy Roland Berger, surveyed 205 Chinese companies and organizations operating in the EU.

The respondents singled out the EU’s economic security agenda as their top concern, with 90 percent saying it has “directly or indirectly undermined their operations and their confidence in the EU market.” Other issues included rising labour costs, a shortage of highly skilled workers, geopolitical tensions, and inconsistent China policies at both the regional and member-state levels.

Tighter foreign investment screening by Brussels, with a focus on critical infrastructure, semiconductors, and artificial intelligence, has sharply increased the compliance burden and investment risk for Chinese investors, per the report. As a result, 43 percent of Chinese firms have postponed or modified planned investments across the EU.

Against the backdrop of the bloc’s frequent recourse to trade defence measures, the anti-subsidy investigation into Chinese electric vehicles stands out as "one of the most representative and far-reaching developments in recent years.”

The probe has brought new uncertainty to China-EU economic and trade relations, dealt a blow to Chinese carmakers in the European market, and sparked intense debate within the EU over its economic interests and green transition agenda.

Some businesses expressed the hope that the two sides will return to the negotiating table and resolve their differences through constructive approaches, such as price undertakings.

After the implementation of the Foreign Subsidies Regulation in July 2023, the EU has launched several investigations into Chinese companies, with the scope expanding beyond clean energy, locomotives, and security equipment to also include autos.

The report also outlines the impact of the EU’s new regulatory measures. Sixty-three percent of Chinese firms said the FSR has already affected them -- 12 percent directly and 51 percent indirectly through reputational or confidence damage. Similarly, 43 percent said the EU’s foreign direct investment screening had led them to postpone or modify their investment plans.

Fifty-three percent said their revenue had increased last year, with 12 percent achieving notable growth. On the profitability front, 40 percent reported gains. Sixty-two percent expect revenue to grow this year and 46 percent project higher profits.

Half of the companies plan to raise investment in the EU, with 29 percent indicating a "significant increase." Only 11 percent intend to cut it.

"For Chinese companies, the European market has grown far beyond its initial role as an export destination," CCCEU President Liu Jiandong said. "It is increasingly regarded as a source of technological innovation, a touchstone for global brands, and a core region for aligning with international standards.

"By deepening mutual understanding and trust, we can move beyond narratives of 'competition and cooperation', and work towards a new paradigm of 'creative coexistence' based on mutual respect and shared understanding," Liu noted. 

"We hope that EU and Chinese companies will move forward together, using fair and transparent rules as the ballast of economic and trade cooperation,” he said.

Editor: Futura Costaglione