European Businesses in China Concerned About Regulatory Environment

"Uncertainty about the future of the regulatory environment undermines positive market growth outlook among European companies."

Concerns about the worsening regulatory environment for foreign firms may undermine positive expectations for market growth among European countries, said the European Union Chamber of Commerce's business confidence survey in China for 2010.

The outlook survey, which was jointly released Tuesday with Roland Berger Strategy Consultants, shows that 78 percent of the 514 surveyed European companies are optimistic about surging economic growth in China with nearly half of them have recognized the importance of China's markets; Meanwhile, only 30 percent of respondents identified China as currently the world's top investment destination.

"Remarkably, some 40 percent of respondents expect the regulatory environment for foreign companies to actually worsen for foreign-invested enterprises over the next two years, and a further 22 percent anticipate that there will be no improvement," said the survey.

"Uncertainty about the future of the regulatory environment undermines positive market growth outlook among European companies," it said.

Jacques de Boisseson, president of the chamber warned that while European companies feel China's opportunities outweigh its risks, their continued investment isn't unconditional.

"This is fragile," he said, "If growth is lower, if conditions become tougher, then the balance between opportunity and risk may shift to the negative side."

The survey also lists five top perceived risks for future business in China: global economic slowdown, Chinese economic slowdown, competition from domestic firms, rising labour costs and local protectionism/anti-foreign sentiment, which, according to Mr. Boisseson, have been highlighted for several years.