European companies in China doubt the credibility of the plan to boost demand

European companies in China have doubts about the Chinese government's ability to develop a credible strategy to boost the faltering economy and implement long-promised reforms. This has diminished their willingness to invest in the country, according to a report by the European Chamber of Commerce in China. According to the latest edition of the chamber's position paper, many of the over 1,700 member companies must accept that the emerging issues are increasingly seen as permanent features rather than growth issues of an emerging market. Headquarters and shareholders are increasingly getting the impression that the returns on China investments are no longer commensurate with the risks involved. About two-thirds of the members now report that their profit margins in China are equal to or below the global average. In 2023, EU foreign direct investment in China fell by 29% to 6.4 billion euros ($7.06 billion) compared to the previous year, according to data from the European Commission. As many other markets offer greater predictability and legal security with similar returns, companies find it increasingly difficult to justify investments in China at the previous level. European companies also have to contend with unfairly subsidized Chinese competitors, a highly politicized business environment, President Xi Jinping's increased focus on national security, and persistent market and regulatory barriers. However, the 'central concern' remains China's economic slowdown. After a disappointing second quarter, Chinese policymakers signaled their readiness to deviate from the previous strategy of massive infrastructure investments and instead create targeted incentives for households. Nevertheless, economists are still waiting for more specific plans to revive the $19 trillion economy. Although the intention to establish a comprehensive system of domestic market demand has been emphasized, concrete measures to boost consumption are lacking. An existing program to subsidize the exchange of consumer goods is expected to have little significant impact on domestic consumption, as the per capita amount of about 210 yuan ($29.52) only partially reaches households.