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EU enterprises confident in Chinese market over political risks

Editors note: This year marks the 20th anniversary of Chinas accession to the WTO. How did China’s WTO entry benefit the business environment? What are foreign enterprises expecting for further reform and opening up in the next 20 years? GDToday invited global experts to share insights on Chinas 20 years in the WTO.

20 years is indeed a long time which very much coincides with the founding of European Chamber South China Chapter. “In the beginning, we saw international trade being restored while system procedures were being facilitated,” said Fabian Blake, Vice Chair of EU Chamber South China, “then we witnessed a noticeable improvement on intellectual property protection.”

But that's not everything. “We are expecting further development in the next 20 years. It comes with additional reforms and opening up,” said Fabian.

New Challenges

China-EU business relationship wobble due to political motives

China has been actively engaging with multilateral trading systems since the WTO entry, especially its involvement in trade agreements such as the RCEP, DEPA and CPTPP.

Klaus Zenkel, Chairman of EU Chamber South China, said links to these agreements will help the trade and he believes there will be more products imported to China considering the size of its market. “It will be great if the EU-China Comprehensive Agreement on Investment(CAI) would have been ratified. But it was halted by the EU Commission due to political tensions. Then came sanctions on both sides, which will not help business.”

The CAI is considered as the most ambitious agreement that China has ever concluded with a trading party. It allows Chinese investors to take advantage of the investment opportunities in the European market, while ensuring EU investors achieve better access to the Chinese market.

According to the Chamber, there is increased concern coming from some of its member enterprises about the politicization of their businesses. Klaus Zenkel considered the top-level politics would remain but the fact is enterprises want to do something individually and ink agreements with Chinese companies on common interests.

He referred to the statistics that the investment from Europe to China in the first five months this year increased 70 percent compared to the same period last year. “It indicates European enterprise leaders have more confidence in the Chinese market than the charge of political risk,” said Klaus.

Fabian Blake echoed that people need to dissociate political motives with the establishment of business relationship between EU and China.

Our Business Confidence Survey shows a majority of member companies plan to stay and expand in the Chinese market because China represents 25 to 30 percent of global growth of the next ten years,” said Fabian, “Business does not wait or basically follow these kinds of decisions at the highest political level.”

New Opportunities

Green development goal to deepen China-EU partnership

The annual Position Paper published by the European Chamber of Commerce in China shows a majority of members achieved record high revenue and profit in 2020. The fact that China recovered quickly from the Covid-19 pandemic benefited European companies and helped them balance other company facilities in Europe.

Fabian Blake took his manufacturing business in Foshan as an example, saying, “the manufacturing competence concentrated in the Guangdong-Hong Kong-Macao Greater Bay Area facilitated the growth of his company."

We had to do lots of onshoring due to the epidemic prevention measures. Having different companies here helps sort the problems and reduces the complexity of the supply chain,” said Fabian, “the government’s investment in the infrastructure also makes the movement of goods and people very convenient and efficient.”

Klaus Zenkel highlighted that the transformation from the Factory of the World to the Greater Bay Area brings lots of potential for innovation. “If following the government’s idea to be the innovative center of the world, the GBA needs to double its GDP to reach the Tokyo Bay Area, and double again to reach the San Francisco Bay Area. It’s possible but it requires international talent pool and business environment.”

Fabian Blake added that the focus on innovation will stimulate local authorities to invest and bring in more knowledge. “There will be opportunities in technologies that could facilitate the power transition as required to achieve carbon neutrality by 2060. Products of higher added-value and higher technological contents will also be promising,” he said, “we remain confident that the partnership between EU and China will be expanded from the innovative aspect.”

Klaus Zenkel concluded, “China needs EU while EU needs China.” Although companies are now facing challenges such as the supply chain disruption, global energy crisis and talent shortage, he said the Chamber has been working with local authorities to tackle these issues and facilitate market access for EU companies to enter different sectors.

There are indeed strong opportunities for Europeans. So if we realize the fact that we need each other and look into the business opportunities, we will have a very bright future,” said Klaus Zenkel.

Author: Jasmine

Video: Axin

Graphic design: Mia

Editor: Wing, Keane, Jerry

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