According to the European Union Chamber of Commerce in China, the Asian country is no longer a prospective investment destination.

In an annual position paper released on Wednesday, September 21, the Chamber said European multinationals have to reduce, localize, and silos operation in the world’s second-largest economy. The economic landscape has become more challenging due to Beijing’s policy shifts, with the business group highlighting the COVID policy.

As the Financial Times reports, Chamber president Jörg Wuttke said in a press briefing, “Ideology trumps the economy. Predictability has been challenged by frequent and erratic policy shifts, particularly when it comes to COVID. [Zero-Covid] is a real burden for the economy.”

While the rest of the world has moved on to co-exist with the infectious virus, China is the only country that insists on its zero-tolerance viewpoint, sealing itself from others.

Wuttke notes, “The world lives with herd immunity, and China waits until the world gets rid of Omicron, which is of course unlikely.”

Stringent travel restrictions have driven many international employees away from the country. And the Chamber informs that no new EU businesses have entered the Chinese market since the pandemic began two years ago.

But pandemic curbs are not the only perils that European companies face when operating in China. The Chamber says the government tends to give state-owned enterprises more advantages, with business becoming increasingly politicized.

The report says, “Companies are increasingly viewing the country as less predictable, reliable and efficient, and with geopolitical tensions on the rise, its future is less certain.”

With other issues such as supply chain woes, the potential Taiwan conflict, and the ongoing Ukraine war, European companies are more driven to redirect their attention to other markets.

The Chamber says instead of China, more firms are considering moving production domestically, near customers, or to allies’ nations.

China’s human rights record is also putting firms on thin ice at home over their practices in the country. 

The Chamber believes it is difficult for corporations to carry out independent third-party audits of supply chains in Xinjiang. This might get them run afoul of the newly introduced regulations on forced labor relating to the region.

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