‘Ideology trumps economy’: EU body warns companies against souring in China | Business and Economy

The European Union Chamber of Commerce says companies increasingly view China as “less predictable, reliable and efficient”.

China’s “inflexible” COVID-19 restrictions and politicization of business are eroding its position as an investment destination, a top European industry group has warned.

The European Union Chamber of Commerce said in a report Wednesday that companies are increasingly viewing China as “less predictable, reliable and efficient” because of the priority of ideology over economics and pragmatic policy making.

The corporate lobby group said Beijing’s ultra-strict “dynamic zero COVID” policy had caused “unprecedented disruptions” in the industry, while factors such as cronyism toward state-owned enterprises had further undermined confidence.

The trade association, which represents more than 1,700 European companies in China, said most companies had put their operations in the country on a wait-and-see basis and started evaluating alternative markets, with the bulk of European investment over the past four years. from a handful of large companies.

“While in the past Beijing’s reform agenda helped ensure stability, fuel economic growth and facilitate massive inflows of foreign direct investment, now ideology trumps the economy,” the sector organization said in an accompanying press release.

The European chamber said Beijing must implement “comprehensive market reforms” to restore business confidence, which should give policymakers the political space to “make mistakes”, discuss ideas and ultimately change course.”

“European companies are still eager to contribute to China’s economic development, but investment in the country is unlikely to increase as long as China keeps its doors closed and companies see increasing political, economic and reputational risks,” said Jörg Wuttke, chairman of the European Commission. Union Chamber of Commerce in China.

“Companies are also clamoring for transparency in the business environment as they now need to align their operations in China with both business promises and new supply chain legislation in the EU and the United States.”

China is the last major economy to use draconian restrictions like lockdowns and border controls as part of a zero-tolerance strategy aimed at eradicating COVID-19 at almost any cost.

The controversial strategy has taken a heavy toll on the world’s second-largest economy, which narrowly avoided contraction in the second quarter with GDP growing 0.4 percent.

Beijing has defended the policy as necessary to save lives and warned against “laying flat” against the virus.

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