As Western countries and China engage in a tit-for-tat sanction battle, escalating tensions, the business environment for American and European Union (EU) companies operating in China is becoming increasingly challenging. Particularly among European companies, there is growing discontent that government regulations are overly focused on, which diminishes the competitiveness of their own businesses.
According to the Washington Post and other sources, Joerg Wuttke, President of the EU Chamber of Commerce in China, stated in a lengthy report on March 20th that “the global business environment is becoming increasingly politicized,” and companies are facing difficult decisions to maintain relationships with the Chinese market. He further expressed concerns that China’s evolving business environment reflects the government’s efforts to minimize risks from trade conflicts with the West.
Despite the Chinese government’s insistence on openness towards foreign firms and investments, it seems to impose discriminatory sanctions. According to the report, companies operating in China face the threat of seizures due to the ambiguity of national secrecy laws and stringent data handling regulations. Industries dealing with sensitive data, such as medical equipment, find research and development (R&D) particularly challenging. One official noted significant concerns among pharmaceutical companies regarding data security regulations that make clinical trials impossible.
Tensions in trade between the EU and China have escalated after the EU initiated an anti-subsidy investigation into Chinese electric vehicles last year. The EU anticipates countervailing duties, claiming that cars, electric vehicles, and steel, supported by the Chinese government, are entering the market at low prices, undermining fair competition. China has responded by conducting anti-dumping investigations against three French brandy manufacturers. Wuttke highlighted that Europe’s approach to trade and investment with China focuses on eliminating dependence rather than competition. American companies in China are reportedly facing similar challenges. Sean Stein, Chairman of the American Chamber of Commerce in China, emphasized the industry’s desire for both sides (U.S. and China) to clarify the definition of national security, stating, “What we need is predictability and certainty.”
Meanwhile, complaints about the domestic business environment are mounting in the European automotive industry, which is competing with Chinese companies fully backed by their government. Luca de Meo, chairman of the Renault Group, stated yesterday that “the European automotive sector is exposed to ‘competitive imbalances’ and is facing difficulties.” While the United States protects its industries with the Inflation Reduction Act (IRA), and China does so with substantial subsidies, Europe is seen as implementing one-sided regulations. According to a report from Renault, the European market faces higher energy costs than the United States and China, and wage costs are 40% higher. The EU is expected to introduce up to 10 new regulations annually by 2030. severe warned of serious concerns and increasing signs of weakness if Europe fails to take action, noting the automotive industry’s high economic importance in the EU, generating €392 billion in value and accounting for 20% of total tax revenue.
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