A Quarter of European Companies Plan to Leave China Over Strict ‘Zero-COVID’ Policy: Report

A worker wearing personal protective equipment (PPE) padlocks a fence securing a residential area under COVID-19 lockdown in the Huangpu district of Shanghai on June 13, 2022. Hector Retamal/ AFP via Getty Images

A recent survey of European businesses shows nearly a quarter of companies are considering leaving China due to Beijing’s stringent COVID-19 measures.

On June 20, the European Union Chamber of Commerce in China (European Chamber) released its “Business Confidence Survey 2022” (BCS).

The report showed a significant drop in European business confidence.

In the news release, Bettina Schoen-Behanzin, vice president of the European Chamber, said, “Increasing numbers of European businesses are putting China investments on hold and re-evaluating their positions in the market as they wait to see how long this uncertainty will continue, and many are looking towards other destinations for future projects.”

‘COVID-19 Wreaks Havoc on Business Operations’

The BCS data revealed that the pandemic and economic slowdown were the two main issues faced by European businesses in 2021. The pandemic ranked first among the top three challenges for 49 percent of respondents, while China’s economic slowdown was the second most challenging for 24 percent of respondents.

The report said that China’s stringent COVID-19 containment policies make it more challenging to attract and retain foreign talent.

A worker works on a production line manufacturing bicycle steel rims at a factory as the country is hit by the COVID-19 outbreak in Hangzhou, Zhejiang Province, China, on March 2, 2020. China Daily via Reuters

‘Market Access and Regulatory Barriers Persist’

More than 40 percent of respondents reported that they missed business opportunities in 2021 due to market access restrictions or regulatory barriers, a continuation of a trend that has changed little over the past seven years, according to the report.

According to BCS, 54 percent of respondents expect “an increase of regulatory obstacles in China over the next five years, the highest level recorded since 2018. Nearly a third expect no improvement to the status quo.”

The BCS also revealed that the majority of compelled technology transfers continued to occur after “the Foreign Investment Law (FIL)—which prohibits technology transfers by administrative means—came into force on 1st January 2020.”

The Departure Trend

Last week, the American Chamber of Commerce Shanghai issued its June COVID impact survey.

The report indicated that 26 percent of manufacturers are accelerating the localization of their China supply chains while moving production of global products out of the country.

Among manufacturers, 35 percent are operating at full capacity. For those unable to operate at full capacity, the majority (71 percent) encountered difficulty moving between facilities and home, according to the survey conducted on June 7–9.

Among the respondents, 87 percent reported the negative impact of COVID lockdowns on company revenues.

Wu Wei contributed to this report.