European companies in China are at a 'crossroads' about increasing their investments.

• Beijing must act to encourage European businesses to continue investing in China, as the companies have become discouraged with the outlook for operating in the country, according to the EU Chamber of Commerce in China.
• Jens Eskelund, president of the chamber, stated ahead of the paper's release that they believe they are in a tipping point situation and if action is desired, the time is now.
• Eskelund stated that while there may be debates about the short-term future of China, its long-term potential is widely accepted. The focus here is not on China's capabilities.

Beijing must act to encourage European businesses to continue investing in China, as they have become discouraged with the outlook for operating in the country, according to the EU Chamber of Commerce in China.

Despite being the world's second-largest economy, China's growth has slowed down. Additionally, the country has not taken substantial action on its long-standing promises to enhance the business environment, resulting in "promise fatigue," as stated in the latest position paper released by the chamber on Wednesday.

Jens Eskelund, president of the chamber, stated ahead of the paper's release that they believe they are in a tipping point situation and if action is desired, the time is now.

According to China's Ministry of Commerce, foreign direct investment into China decreased by 29.6% during the January to July period compared to the same period a year ago. The ministry stated that the decline was due to the high base of investment from the previous year.

The Chinese government has attempted to address foreign business concerns, including data transfer and travel visa acquisition, through the involvement of various departments.

Chinese authorities declared that foreign businesses can fully own hospitals in specific cities and regions, conduct human stem cell research and treatment in certain areas, and the government will remove restrictions on foreign investment in manufacturing over the weekend.

Beijing has promised to decrease the negative list, a list of industries that foreign businesses are prohibited from entering in the country. However, critics argue that Beijing has been limiting foreign entities from operating in profitable industries such as financial services until domestic companies have established themselves.

Eskelund stated that despite the positive developments, they did not significantly impact European businesses, particularly when members' expectations for profitability in China over the next two years are at a record low.

Perhaps, given the current market conditions, it may be necessary to expedite your actions involving [red tape] in order to achieve the same returns as before the pandemic.

Despite official targets of a 5% growth in China's economy this year, retail sales only increased by 2% in June and 2.7% in July. Additionally, imports in U.S. dollar terms only rose by 0.5% in August, indicating a persistent lack of domestic demand.

Eskelund stated that while there may be debates about the short-term future of China, its long-term potential is widely accepted. The focus here is not on China's capabilities.

"We observe impressive supply chains and recognize the long-term potential of China as a consumer market," he stated. "However, we require tangible evidence that this can be achieved within a reasonable time frame before making investments."