European companies in China report sales growth

More than 60 percent in survey say country's slowing economy is their top concern

European companies in China reported that their business improved last year, with more than 50 percent of enterprises achieving higher sales in 2016 than in 2015, a report released on May 31 said.

Information and communication technology, automotive, machinery, cosmetics, environmental and retail companies all saw growth in revenues.

The European Union Chamber of Commerce in China, in cooperation with the consulting company Roland Berger, released its annual Business Confidence Survey 2017 in Beijing.

Notably, more businesses reported profitable earnings before interest and tax than at any other time since 2010. Sectors such as travel, aerospace, education, pharmaceuticals and engineering reported sharp increases in profits that ranged from 70 percent to 100 percent. These improvements were possible in part due to increased demand as well as careful cost management.

Moreover, China's intellectual property rights protection saw some improvements, and President Xi Jinping's anti-graft campaign has had a noticeable impact, the report said.

But the European companies still have concerns about the future of China's economic slowdown. More than 60 percent of respondents ranked China's slowing economic growth as their No 1 concern, closely followed by the ongoing struggle to find and retain qualified employees.

Mats Harborn, president of the European Union Chamber of Commerce in China, says that more than 56 percent of European companies would be prepared to ramp up their investment if they saw more openings in China.

China and the EU finished the 13th round of negotiations for a bilateral investment treaty two weeks ago in Beijing. Harborn believes a successfully concluded bilateral investment treaty will be crucial for strengthening European investors' confidence in China.

"Our expectation is that China will take a lead role in the world globalization and free trade," he says.

"We want to be very ambitious. We would like to see a conclusion within 12 months."

This year's survey also includes a wake-up call to the whole of Europe. Competition in China has stiffened, and respondents feel that Chinese private companies have become a lot more innovative.

According to the survey, 60 percent of European companies in China expect Chinese companies to have closed the innovation gap by about 2020.

"European companies in China acknowledge that Chinese companies are getting increasingly innovative. Rather than a challenge, this should be perceived as an opportunity," says Denis Depoux, Roland Berger's co-head for Asia.

"European business can be a key contributor to the innovation required from Chinese businesses to climb up the value chain, and they can also learn from domestic innovation for their own benefit, notably on go-to-market-related innovation," he says.

Harborn adds that European companies are always looking for the best innovation and best technologies. For example, many foreign banks have sent experts to learn how to enter the financial technology sector in China.

Contact the writers at chenyingqun@chinadaily.com.cn

(China Daily European Weekly 06/02/2017 page25)