“Challenges will only increase…”, British firms foresee tougher business conditions in China

British Chamber of Commerce in China: British companies anticipate increasing challenges in operating within China over the next five years, according to a British business lobby group. The outlook comes as Beijing attempts to counteract the retreat of foreign investment from a market once heralded as a global growth engine.

In its latest position paper, the British Chamber of Commerce in China criticised the 48 measures Beijing has implemented since August to restore investor confidence, stating they fall short of "meaningful opening up." The chamber highlighted that geopolitical tensions are a major concern for British investors.

Although foreign direct investment constitutes only 3 per cent of total investment in China, its decline over the past two years has been interpreted as a signal of waning confidence in the world's second-largest economy and a potential threat to the competitiveness of Chinese firms.

"British companies have yet to see government measures translate into 'meaningful opening up', and they anticipate that regulatory obstacles will increase rather than decrease in the next five years," the chamber stated.

Heightening trade tension

The chamber further noted that British business confidence is being dampened by the growing risk of heightened trade tensions due to a complex geopolitical environment.

Among the chamber's members are notable companies such as AstraZeneca, BP, Jaguar Land Rover, Standard Chartered, and Rolls-Royce.

Foreign firms are reportedly finding China less welcoming than before the pandemic, with President Xi Jinping advocating for self-reliance and urging officials to persist with a production-focused, debt-driven development model despite Western opposition.

"China is evidently charting a new course in its relationship with businesses, but clarity regarding the role of businesses is essential," said Julian Fisher, the chamber's chair. "The current ambiguity is frustrating."

Perception of China needs improvement

The chamber called on Chinese authorities to improve the "perception of China as a predictable market for business" and to engage more with British firms, especially regarding plans to stimulate new growth engines and address suspected overcapacity.

Data from China's commerce ministry indicated an 8 per cent decline in foreign direct investment last year. A broader measure from the currency exchange regulator, which includes flows of retained earnings, showed an approximately 80 per cent decline in 2023 to $33 billion, marking the steepest drop since records began in 1980.

"If the government can introduce greater predictability, clarity, and transparency when implementing policy, it will go a long way to restoring business confidence in the market," the chamber concluded.

(With Reuters inputs)