Thread by @euchinahub

[THREAD - KEY SUMMARY]
European Business in China - Business Confidence Survey 2020 by @EuropeanChamber

Summary based on the report and our #podcast interview with Charlotte Roule - Vice President of the European Chamber.

Podcast coming out June 11th.

https://twitter.com/EuropeanChamber/status/1270572877062930434

0/ SAMPLE
📍Company Size
~50% <250 employees
~30% >1k employees
~20% in between
JVs employees not counted

📍Sector
~30% professional services
~35% industrial goods
~21% consumer goods
Rest - specific (e.g. agriculture)

📍% in tweets refer to answers by the Chamber's members

1/ SOFT DOWNTURN
📍Feb 2020 - #EU companies in #China (still before the magnitude of #COVID19 known) noticed worsening conditions comparing to previous years
📍49% said "#business became more difficult"
📍But 41% noticed that market was opening in 2019

📍Only 50% saw YoY revenue growth- lowest since 2010
📍Only 46% of #SMEs noted a revenue increase in 2019
📍47% companies planned to cut costs in 2020
📍Now also challenge of travel ban on foreigners - entrance is long, requires authorisation
📍This affects also technical experts

2/ ONE #ECONOMY, TWO SYSTEMS
📍Key expression of the report
📍Partial, uneven opening of sectors
📍Unequal treatment and SOEs gaining over private
📍40% feel unequally treated comparing with CN counterparts
📍Over 50% see no level-playing field(CN firms enjoy better access in EU)

📍45% - still face #market access barriers (same number as last year)
📍40% - access to financing is limited (big position of SOEs)
📍43% - "business in CN has become more political"
📍91% - foreign companies face stronger enforcement of environmental regulations

3/ STRONGER #SOEs
📍44% local POEs have insufficient financing, as SOEs soak up local financing (lower perceived credit risk, lower profitability requirements)
📍SMEs hit hard by pandemic given limited cashflow (+ #MNEs withdraw deposits from banks, limiting access to financing)

📍70% of EUCham members are facing competition with SOEs
📍48% expect SOEs to gain over POEs
📍Impact of CN's COVID-19 response to be seen, but Beijing may be tempted to focus on SOEs
📍But there is (new) messaging from CN gov that support will be given to SMEs

📍EU and CN have a different perspective on SOE reforms - EU (addressing overcapacity and market distortion) and CN (make SOEs "bigger, better, stronger")
📍This remains a key point of contention in CAI negotiations

4/ DIVERSIFICATION & RELOCATIONS
📍EU companies initially didn't expect the pandemic to hit so badly, as many have their markets in China both supply and demand soared
📍Bringing supply chain back up very challenging - even 99% recovery won't work if missing one key part

📍Industry recovered faster than goods and services
📍Overreliance on single supplier/country is a problem, but relocation is not necessarily a good move - it's not only about production, but the whole ecosystem (suppliers, logistics, subcontractors) - that's a very costly move

📍Only 11% planned to shift investments to other markets before pandemic (generally ones producing for export and using low-level schemes), this has not changed significantly amid the pandemic
📍EU companies are less eager to relocate than US or Japanese counterparts

📍EU Chamber members produce mostly "in China, for China", sense of relocation questionable
📍Supply chains related to China are rather resilient, as they were constructed on the basis of their economic efficiency (best price for consumers)

📍69% think China is more innovative than Europe, so there is a need to tap to the market while pushing for its liberalisation
📍EU in the process of identifying strategic goods and pushing for diversification of related supply chains - but that's security/political issue

@threadreaderapp do youe magic - unroll

May be of interest to:
@bueti @m_huotari @lucrepogge @b_goralczyk @J_Jakobowski @Jacob_T_Gunter @Viviana_Zhu @FGodement @Shilinabolan @stuartlauscmp @CER_IanBond @FraserMCameron @TheresaAFallon @oertel_janka @ivana_karaskova @shada_islam @ajwsmall @AgathaKratz @florianeder