Sep 11, 2020 08:26 PM

Charts of the Day: EU Companies in China Struggle With Staff Stranded Overseas

European businesses in China are continuing to struggle with the fallout of the Covid-19 pandemic, while long-standing problems such as limited market access and a complex regulatory environment continue to take a toll, the European Union Chamber of Commerce in China said in its annual position paper released Thursday.

Even as economic growth has slowed, both in China and globally, the country’s market potential remained significant, the report suggested. In a June survey conducted by the chamber, about 39% of 588 responding member companies reported that their China operations saw revenue growth in 2019 of up to 20% year-on-year, and 11% of the respondents saw even greater expansions, the European Chamber said in the position paper.

However, just under half of member firms reported missing out on business opportunities as a result of market access restrictions and regulatory barriers in China, 40% of whom claimed those lost opportunities amounted to more than 10% of their annual revenue, the European Chamber said in the paper.

“The current web of restrictions facing foreign companies trying to invest in China are extremely burdensome and actually hold back China’s overall development,” the position paper said. “It will only be possible to unleash the full potential of its market by increasing foreign investment, which in turn will also strengthen competition.”

If greater market access were to be granted, 62% of the responding members in the June survey said that they would likely increase their investment in China. Of those, roughly half are ready to invest an additional 5% to 10% of their annual revenue, while almost one-third said they would invest even greater sums.

In addition to market access barriers, the strict travel restrictions China has imposed to control the spread of the novel coronavirus have “resulted in a huge number of European Chamber member companies being left without key personnel,” the position paper said.

A July survey conducted by the European Chamber’s Shanghai Chapter showed that over half — 56% — of 143 responding companies still had foreign staff unable to return to China. Only about 18% of the respondents said all their foreign staff had returned.

This staffing situation has led to missed business opportunities. About 40% of 98 responding European Chamber member companies said that their sales had been negatively impacted, while 30% said they expected to see a drop in revenue this year due to staffing problems.

Large multinationals may see their efficiency reduced or some parts of their businesses suspend operations, while small and midsize enterprises tend to be more reliant on a foreign chief representative or one or two foreign experts that are central to their business, the European Chamber said in the position paper. “Their long-term absence is less a matter of profitability, and more the actual survival of the company,” it said.

Contact reporter Timmy Shen (hongmingshen@caixin.com) and editor Joshua Dummer (joshuadummer@caixin.com)

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