European businesses have never been this gloomy about China

European business optimism about China has hit its lowest on record – worse than during the pandemic — due to slower growth and geopolitical worries.

A record 73% of respondents in the EU Chamber of Commerce in China’s annual survey said doing business in the Asian country has become more difficult in the past year, marking a new high for a fourth-straight year.

That’s just one of the several record lows in sentiment found in the annual survey, which has been published since 2004. The latest study released Wednesday, covered 503 respondents in January and February.

“Companies are really feeling the squeeze, being pessimistic, but again finding very compelling supply chains in China that necessitate a continued presence [in] the Chinese market,” Jens Eskelund, president of the chamber, told reporters this week.

Still, that doesn’t mean business confidence is close to returning.

“We haven’t seen an inflection point yet,” Eskelund said. “A lot of it boils down to uncertainty.”

The survey reflected how challenges for foreign businesses in China have largely increased since the pandemic lockdown in 2022 disrupted supply chains. While local brands have become more competitive, overall consumer demand has remained lackluster amid the real estate slump and uncertainty in the job market.

Cosmetics companies were particularly hit. The industry blamed a drop in local demand and reported a 45% drop in revenue in 2024 from a year before — only the second decline in the past decade, according to the chamber’s report.

On the other hand, aviation and aerospace were the rare industries saying that doing business in China became easier.

Slower growth is diminishing China’s attractiveness relative to other markets.

A record low of only 12% of respondents were optimistic about profitability in China in the coming two years, while the fewest on record ranked the country as a top destination for future investments. Another record low of 38% of respondents said they planned to expand in China over the coming year.

And while Beijing has announced efforts to improve conditions for foreign investment, many challenges remain.

A record 63% of respondents said they missed business opportunities in China last year due to market access restrictions and regulatory barriers. Medical device businesses who responded said European companies experienced discrimination due to public procurement practices favoring domestic players.

The scale of pessimism echoed an annual survey of U.S. companies in China released in late January that showed a record share of American businesses were accelerating plans to relocate manufacturing or sourcing.

Meanwhile, 53% of respondents said they would increase their investments in China if more action was taken to improve local market access.