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European Interest in China Investments Wanes

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BEIJING—European corporate investment in China, a major source of Western technology and capital, has plummeted since China began opening up its economy four decades ago, and is now mostly a small number of multinationals. Limited to companies.

The loose investment is the latest in a series of ominous signs for the Chinese economy. The property market is sluggish, with prices falling as transaction volumes plummet in many Chinese cities. Consumer spending has dried up due to stringent ‘Covid zero’ policies that have led to lockdowns in many cities. Geopolitical tensions have also dampened US investment in China.

According to the statistics of foreign direct investment released by China, it is gradually rising overall. However, most of what China considers to be foreign investment comes from Hong Kong and tends to consist of mainland funds that have temporarily transited Hong Kong as a means of minimizing taxes.

A new analysis by New York research firm Rhodium shows that so-called greenfield investment from the European Union and the UK in new factories and other equipment has plummeted.

Those investments fell to just under $2 billion in the first half of this year, compared with $4.8 billion in the first half of last year, according to Rhodium.

A handful of German manufacturers like Volkswagen still make up the majority of some European investments made in China. finances these investments by keeping the profits it generates in China.

“A few big companies are supporting the numbers,” said Noah Birkin, managing editor of Rhodium’s China division. “Many others are reassessing their existence.”

China’s European Chamber of Commerce said in a separate report issued in Beijing on Wednesday morning that European companies have sent executives and executives from abroad to China, which has severely restricted international travel to reduce the risk of the coronavirus. He said he was frustrated with the difficulty of getting employees. occurrence.

Before the pandemic, China allowed 6-7 million international arrivals per month. But in July, the most recent month for which data are available, he was just 146,000. Nearly zero at the same time last year, it’s only a fraction of his three million arrivals in Singapore this July.

China’s economy grew just 0.4% year-on-year in the second quarter, making the Chinese market less attractive for foreign investment.

No new European companies have entered the Chinese market since the pandemic began, and all but the largest European companies have lost interest, said Jörg Wuttke, president of the chamber of commerce.

“They don’t even want to think about China,” he said, adding that the company’s preferences were “obviously Southeast Asia, India, and the rest of the world.”

On Tuesday, the Swedish Chamber of Commerce in China released a survey showing that many of its members are pessimistic about China’s investment climate. Members of the Swedish group were concerned about tight pandemic management, including an often 11-night quarantine for people arriving from abroad and other restrictions on international travel.

China’s willingness to buy imports ranging from luxury goods to factory equipment has also declined, the chamber said. China has sought to build more independence through programs such as Made in China 2025, which prioritizes domestic manufacturing over imports.

Unlike the US, Europe had a modest trade deficit with China before the pandemic. But China exported $302 billion in the first half of this year, while she only bought $112 billion worth of European goods. Growing imbalances have made European companies and countries more willing to voice their concerns about China’s policies.

In its report, the European Chamber recommended to the Chinese government a set of policies to revive foreign investment. This includes not encouraging Chinese consumers to boycott European goods over controversies such as policy.

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