© Reuters. FILE PHOTO: Chinese and British flags fly along the Mall in London, Britain October 19, 2015. REUTERS/Suzanne Plunkett/File Photo
By Joe Cash
BEIJING (Reuters) – A slowdown in both the Chinese and global economies is the biggest issue affecting British firms in the world’s second-largest economy, beating geopolitical concerns and market access barriers, according to the British Chamber of Commerce in China.
While the “peak pessimism” recorded during the pandemic is easing, British businesses are delaying making new investment in China amid a stuttering economic recovery and are downgrading the country’s importance to their global operations, the Chamber’s annual sentiment survey released on Tuesday said.
Foreign investors have been sour on China for most of this year, owing to a weaker-than-expected COVID recovery, a series of office raids by Chinese authorities, cash-strapped local governments offering fewer investment incentives, and higher investment yields in the United States.
“As China reopens after three years of substantial pandemic-related disruptions, external factors are still pushing British businesses to be hesitant towards the market,” the Chamber said.
“(British) companies in China are effectively treading water, with many delaying key decisions around investment and market entry.”
AstraZeneca (NASDAQ:) , BP (NYSE:) , Jaguar Land Rover and Shell (LON:) are some of the Chamber’s members.
The Chamber’s findings, based on members’ views over October and November, revealed that 60% of companies felt that doing business in China had become more difficult over the past year, with 78% of such firms blaming economic factors.
Over half the companies surveyed said geopolitics was making it harder to operate in China, while 43% of firms were struggling with regulatory issues such as licence acquisition.
Foreign direct investment into China has slowed substantially since the country abandoned its strict COVID-19 curbs late last year, leading the country to record its first-ever quarterly deficit in foreign direct investment over July-September, suggesting capital outflow pressure.
The Chamber said that while “British businesses are experiencing a slow return in optimism,” a trend in which firms are downgrading China’s importance to their global operations “appears to be stabilising.”
Just under half of the surveyed companies listed China as a “medium priority” or “low priority,” with only 40% of firms recording it as a “high priority.” In comparison, fifty nine percent of companies saw China as a “high priority” over 2021-2022.
Trade between the UK and China was worth 111 billion pounds ($140 billion) last year, according to the British National Bureau of Statistics, making China the UK’s fourth largest trading partner.
