Foreign companies shifting investment out of China

Foreign companies are shifting investments and their Asian headquarters out of China as confidence plunges following the expansion of an anti-spying law and other challenges, a business group said Wednesday.

Companies are uneasy about security controls, government protection of their Chinese rivals and a lack of action on reform promises, according to the report by the European Union Chamber of Commerce in China.

They also are being squeezed by slowing Chinese economic growth and rising costs.

Business confidence in China is "pretty much the lowest we have on record," the European Chamber president, Jens Eskelund, told reporters.

"There's no expectation that the regulatory environment is really going to improve over the next five years," Eskelund said.

Two-thirds of the 570 companies that responded to the survey said doing business in China has become more difficult, up from less than half before the pandemic.

Three out of five said the business environment is "more political," up from half the previous year.

Companies also are uneasy about Beijing's promotion of national self-reliance. Xi's government is pressing manufacturers, hospitals and others to use Chinese suppliers even if that raises their costs. Foreign companies worry they might be shut out of their markets.

One in 10 companies in the European Chamber survey said they have shifted investments out of China. Another 1 in 5 are delaying or considering shifting investments. In aviation and aerospace, 1 in 5 companies plan no future investment in China.

The European Chamber noted it wasn't just foreign companies that are moving: 2 out of 5 in its survey reported Chinese customers or suppliers are shifting investments out of the country.