British companies say business in China has become harder amid slowing economy, regulatory challenges and competition from state-owned rivals
- Forty-eight per cent of UK companies surveyed by the British Chamber of Commerce in China say business has become more difficult in 2019
- A quarter of respondents said they were treated unequally by the government, when compared to state-owned enterprises
Half of British companies in China say doing business has become harder this year, citing a slowing economy, continued regulatory challenges and unfair treatment by the government, a new survey shows. Optimism about future business in China has declined since last year.
Forty-eight per cent of UK companies in mainland China say business has become more difficult in 2019, compared to 31 per cent last year, according to the second annual survey by the British Chamber of Commerce in China released on Tuesday.
BritCham China surveyed 249 British businesses in mainland China, across a variety of sectors, with a combined annual revenue of £22 billion (US$28.9 billion).
“The uncertainty around us has driven quite a lot of that – global economic uncertainty, the slowing economy in China itself, labour costs – these are all weighing on the British business community here,” said St John Moore, chairman of BritCham China, at a briefing in Beijing on Tuesday. “Understandably, we want more certainty in the business environment as we look forward to the year ahead.”
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The continued difficulty in accessing the Chinese market on a “level playing field” is also weighing on the confidence of British businesses in the world’s second largest economy. Over the past year Beijing has pushed to deepen its reliance on state-owned enterprises (SOEs) and reduce dependence on overseas markets amid an escalating trade war with Washington.
BritCham found a quarter of respondents said they were treated unequally by the government, when compared to SOEs, with the engineering and construction, energy, and travel, tourism and leisure sectors reporting the most unfavourable treatment.
The companies ranked competition with SOEs as their third largest regulatory challenge, up from 10th place last year.
Confidence about doing business in China in 2020 has dropped to 54 per cent from 65 per cent of companies reporting an “optimistic” outlook in 2018.
“That optimism has a fragility to it. If we don’t see continued progress then that optimism may well be drained further,” said Moore. “We have to see positive progress...about [China’s] commitment to continue to reform.”
China has been attempting to improve its business environment for foreign players. Concerns over intellectual property protection dropped to the 13th largest regulatory challenge in this year’s survey, from 3rd place in 2018.
Meanwhile in January, Beijing is set to implement a new foreign investment law, in an effort to open the market and level the playing field with domestic companies.
“There is still a bit of a wait-and-see approach at the moment. In writing, the foreign investment law is very positive,” said Moore.
“[But] until we get into next year and see the actual execution on the law, we are not going to know the genuine impact [it] will have. We have a cautiously optimistic view.”
Despite all of the challenges, 60 per cent of British businesses said they will increase investments into China next year, due to the “market potential” of the world’s second largest economy. Investments are set to be led by the transport and logistics, media and publishing, health care and financial services sectors.
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Meanwhile 64 per cent of British businesses said they would increase any investments, if China continues to increase market access for foreign players, BritCham’s study found.
“Even in the face of saying the climate has become more difficult, we are still putting money into the market,” said Moore. “It is clear that the more [China] opens, the more British businesses are following.”
And, if Britain were to leave the European Union in 2020 and implement a free-trade agreement, almost half of respondents said it would have a positive impact on their business in China.
