According to a French economic newspaper, multinational corporations in China are losing their confidence following the brutal lockdown imposed on Chinese cities.
The newspaper Les Echos on June 21, published an analysis article titled “The crisis of confidence of multinationals in China,” focusing on the shocks by the business community in the world’s second-largest economy.
The analysis pointed out that some factors are pushing multinational companies to reassess the “China risk,” such as China’s zero-Covid policy, the Ukraine-Russia war, and China-U.S. tensions.
The article said that the business and trade community had always praised Shanghai before. However, they were shocked by the sudden and brutal strict lockdown in the Chinese financial hub following the recent Covid pandemic. The lockdown and the broader disruption caused by China’s zero-Covid strategy meant huge economic costs.
Foreign companies were accustomed to lucrative profits in China. But they now have to scale down their forecasts.
According to the European Union Chamber of Commerce in China, 60% of European companies had lowered their business targets for 2022 as of April.
Both the Covid epidemic and China’s strict containment measures have become the sword of Damocles hanging over the heads of the companies.
A French business owner in China complained that “China has become completely unpredictable.”
A French Chamber of Commerce and Industry survey in China revealed that 80% of French businesses said that China’s zero-Covid policy is affecting their investment strategies. 76% believed that China’s image has deteriorated.
In addition, geopolitical tensions and growing competition between the U.S. and China are significant factors influencing corporations.
The Russia-Ukraine conflict suddenly raised new risks for Western companies in China. They fear possible consequences if China learns from the war and attacks Taiwan by force.
Besides, multinational companies are eyeing the rise of local Chinese competitors, the regulatory restrictions, and the risk of doing business with China due to Western condemnation of human rights abuses in Xinjiang and Hong Kong.
The analysis pointed out that the investment willingness in China may decrease this year. However, those problems are insufficient to make multinational companies lose interest in or even leave that massive market because it still has better growth prospects than other countries.