The challenges reflect broader ones faced by a Chinese economy hobbled by a prolonged real estate crisis that has hurt consumer spending. Beijing also faces growing pushback from Europe and the United States over surging exports.
“The image has declined significantly across numerous critical indicators,” stated the European Union Chamber of Commerce in China at the beginning of its Business Confidence Survey 2025.
The factors boosting Chinese exports are also dampening the business prospects within China’s domestic market. Many Chinese firms, frequently lured by governmental incentives, have heavily invested in sectors like electric vehicles due to state support. This has resulted in manufacturing capabilities vastly exceeding current demand.
Excess capacity has led to intense pricing battles that have eroded profit margins, accompanied by corporations simultaneously expanding their presence in international markets.
In Europe, this situation has raised concerns that increasing imports from China might weaken their domestic industries and the workforce employed therein. Last year, the European Union imposed tariffs on Chinese electric vehicles, claiming that China had provided unfair subsidies for electric vehicle manufacturing.
“I believe there is a distinct understanding that the advantages of the bilateral trade and investment relationship are not being shared fairly,” said Jens Eskelund, president of the EU Chamber in China, when speaking with journalists earlier this week.
He praised China’s initiatives aimed at increasing consumer expenditure; however, he emphasized that the administration should also implement measures to guarantee that supply expansion does not exceed demand growth.
Eskelund stated that the survey findings indicate an increase in profit pressures during the last year, along with a decline in business confidence that hasn’t reached its lowest point yet. Approximately 500 member firms participated in this poll from late January through early February.
“It’s extremely challenging for everybody at present in this atmosphere where profit margins are shrinking,” he stated.
