European businesses operating in China are increasingly pessimistic about their prospects, as the country’s ongoing property crisis and export-driven overcapacity continue to weigh heavily on the market. These issues are compounded by rising trade tensions with the West, particularly in Europe and the United States.
“The picture has worsened on many key indicators,” the European Union Chamber of Commerce in China stated in its newly released Business Confidence Survey 2025.
China’s Export Surge Sparks Trade Concerns
Over the past year, China has experienced rapid export growth, particularly in industries like electric vehicles (EVs). Many of these sectors have seen massive investment—much of it driven by state subsidies—leading to production capacity that far exceeds domestic demand.
This overcapacity has triggered aggressive price competition among firms, reducing profit margins. To remain profitable, many companies have shifted their focus to foreign markets.
However, this strategy has raised red flags abroad. In Europe, officials worry that an influx of low-priced Chinese goods—especially electric cars—could harm local manufacturers and workers. In response, the European Union imposed tariffs on Chinese EV imports last year, accusing Beijing of giving unfair subsidies to its automakers.
Business Confidence Hits New Lows
Jens Eskelund, president of the European Union Chamber of Commerce in China, voiced concern about the current business climate during a press briefing earlier this week.
“There is a clear sense that the benefits of the bilateral trade and investment relationship are not being shared fairly,” Eskelund said.
While he welcomed the Chinese government’s recent efforts to boost consumer spending, he warned that long-term stability requires balancing supply and demand. Without such measures, oversupply could continue to hurt profits and investor confidence.
Eskelund pointed to key findings from the survey, which included responses from about 500 member companies between mid-January and mid-February. The results showed that downward pressure on profits had grown significantly over the past year.
“The downward trend in business confidence has not yet bottomed out,” he said. “In an environment of falling profit margins, everyone is in a very difficult situation.”
Structural Problems Undermine Growth
China’s broader economic troubles are closely tied to its prolonged property downturn, which has weakened consumer confidence and limited domestic spending. At the same time, reliance on export-led industries has created an imbalance between supply and demand.
The government’s push for global leadership in sectors like electric vehicles has added to these imbalances. While subsidies have helped companies scale up rapidly, demand—both at home and abroad—has not kept pace.
These conditions, experts warn, could further erode confidence among foreign investors and businesses, especially if profit margins continue to shrink and trade disputes worsen.
