Both the United States and the European Union (EU) have displayed increasing levels of hostility towards Beijing, particularly in the realm of trade relations. In Washington, there have been frequent discussions about the necessity to "decouple" the U.S. economy from China's, while European counterparts prefer the term "de-risk," which essentially points to the same objective.
Interestingly, U.S. and European businesses appear to be independently aligning themselves with their respective governments, not necessarily out of obedience to authorities, but rather due to evolving circumstances in China. This shift in sentiment is notably reflected in the findings of three influential business organizations: the U.S.–China Business Council, the U.S. Chamber of Commerce in Shanghai, and the EU Chamber of Commerce in China. All three groups report a significant and negative shift in the outlook of their members.
For instance, the U.S.–China Business Council conducted a recent survey involving its 117 member companies across China. A striking 28 percent of respondents expressed outright pessimism regarding future business prospects in China, marking a record high. This figure represents a noticeable increase from the 21 percent who held such views in the previous year's poll. Equally significant is the fact that less than half of the survey's participants could muster any sense of optimism, with a staggering 83 percent reporting a decline in their sentiments towards doing business in China. Approximately 43 percent of respondents felt that China's business environment had deteriorated over the past year.
The U.S. Chamber of Commerce's poll, involving 325 members, yielded similar results. Only half of its members conveyed any optimism about China's business environment in the next five years, marking the lowest percentage in the survey's 24-year history. Remarkably, just two years ago in 2021, as many as 78 percent of its members held optimistic views.
While the larger EU Chamber of Commerce in China has not conducted a recent formal survey, its president, Jens Eskelund, has noted a similar souring of sentiment among its members. Eskelund mentioned that the number of Europeans in China is currently at its lowest point in the past three decades.
The reasons behind this growing pessimism and dwindling optimism are consistent among both American and European respondents. Firstly, there is a sense that this shift in sentiment is partially driven by the increasingly hostile stance towards Beijing in Western capitals, including President Joe Biden's actions to restrict technology exports to China and curb U.S. investments in Chinese technology.
Furthermore, members of these business organizations have highlighted changes in China's policy environment as a key factor. Many have pointed to Beijing's limitations on the export of critical materials such as rare earth elements, essential for the production of batteries and electric vehicles. Foremost among the concerns are China's recent antiespionage laws and regulations governing data collection and cross-border information transfers.
In the context of these developments, both American and European respondents have cited instances like Beijing's directive prohibiting government employees from carrying iPhones or any foreign-branded devices to the office. They have also expressed concerns about Beijing's use of its anti-espionage law to raid the offices of U.S.-based due diligence consultant, the Mintz Group, over data collection on Chinese companies. This action resulted in a substantial fine of $1.5 million imposed on Mintz's Beijing operation. Reflecting on these events, one European business representative lamented that in China, the boundaries of permissible activities have become "blurred," contributing to a significantly riskier business environment.
Beyond the notable policy concerns, which hold significant importance, U.S. and European interests are evidently reacting to the upward trajectory of wages in China. According to data from Beijing’s National Bureau of Statistics, wages and salaries in China have more than doubled in the past decade. This growth rate significantly outpaces that of Western developed economies and Japan. While it’s important to note that Chinese wages have not yet reached parity with those in Europe, the United States, or Japan, the gap between them has notably narrowed.
Furthermore, the surge in labor costs in China has made neighboring countries such as Vietnam, Indonesia, and the Philippines more appealing destinations for business operations. This comparison holds particular relevance for companies manufacturing in China for global markets as opposed to those primarily targeting China’s increasingly prosperous domestic consumer base. This distinction likely explains why the prevailing pessimism regarding China is more pronounced among technology and logistics firms than among retailers and service providers.
In this context, both Washington and Brussels have their motives for seeking to reduce economic dependence on China. Remarkably, it appears that Beijing has inadvertently played into the hands of Western governments by offering Western businesses independent incentives to “decouple” or “de-risk” from China. Consequently, China is experiencing a decrease in Western development and investment, which had previously played a pivotal role in its economic advancement.
Xi Lao is a freelance journalist based in Taiwan
