Report: Growing number of businesses leaving China

For decades, corporations have seen China as a profitable place to operate. However, a new report looked at why a growing number of them are beginning to look elsewhere.  

China’s “unpredictability” said to be “poisonous for the business environment”

Elisabeth Braw is a fellow at the American Enterprise Institute, and in a piece published on Tuesday by Foreign Policy magazine, she argued that China’s business climate has changed for the worse.

As evidence, Braw pointed to a press release put out last month by the European Union Chamber of Commerce in China.

It quoted Chamber vice president Bettina Schoen-Behanzin, who said, “The only thing predictable about China today is its unpredictability, and that is poisonous for the business environment.”

“Increasing numbers of European businesses are putting China investments on hold and re-evaluating their positions in the market as they wait to see how long this uncertainty will continue, and many are looking towards other destinations for future projects,” she added.

The press release also linked to a survey which reported that “while most European companies in China posted positive revenues and were profitable in 2021, doing business became more difficult for the majority.”

While many businesses cited challenges created by COVID, they complained of regulatory burdens. Meanwhile, half of respondents said “the business environment became more politicized in 2021.”

More companies looking for friendlier environments

In her piece, Braw pointed to specific examples of what she calls “friendshoring,” a term which refers to the way corporations have been relocating to friendlier nations.

They include Apple moving production of AirPods Pro 2 from China to Vietnam. Samsung is also relocating its Chinese manufacturing, as is Hasbro and Adidas.

She also brought up a poll conducted by the insurance broker Willis Towers Watson, which found that 95% of multinational corporations have grown more concerned about the risks that come with doing business in China, up from 62% two years ago.

Sam Wilkin is the director of political risk analytics at the insurance broker Willis Towers Watson, and he said companies are seeking to diversify on the world stage.

“Partly it’s that old adage about eggs and baskets,” Watson explained. “Recent events have reminded everyone that too much exposure in any single country, no matter what country, puts a company at risk for large losses or even bankruptcy.”

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