European Companies are Less Upbeat About China’s Vast Market as its Economy Slows

President of the European Union Chamber of Commerce in China Jens Eskelund speaks during a press conference for European Chamber in Beijing, China, Friday, May 10, 2024. China is actively seeking foreign investment to boost its slowing growth, but that very sluggishness is weighing on company plans to grow their businesses in the world’s second largest economy, an annual survey of more than 500 European companies has found. (AP Photo/Ng Han Guan) (Ng Han Guan / Associated Press)
President of the European Union Chamber of Commerce in China Jens Eskelund speaks during a press conference for European Chamber in Beijing, China, Friday, May 10, 2024. China is actively seeking foreign investment to boost its slowing growth, but that very sluggishness is weighing on company plans to grow their businesses in the world’s second largest economy, an annual survey of more than 500 European companies has found. (AP Photo/Ng Han Guan) (Ng Han Guan / Associated Press)
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European Companies are Less Upbeat About China’s Vast Market as its Economy Slows

President of the European Union Chamber of Commerce in China Jens Eskelund speaks during a press conference for European Chamber in Beijing, China, Friday, May 10, 2024. China is actively seeking foreign investment to boost its slowing growth, but that very sluggishness is weighing on company plans to grow their businesses in the world’s second largest economy, an annual survey of more than 500 European companies has found. (AP Photo/Ng Han Guan) (Ng Han Guan / Associated Press)
President of the European Union Chamber of Commerce in China Jens Eskelund speaks during a press conference for European Chamber in Beijing, China, Friday, May 10, 2024. China is actively seeking foreign investment to boost its slowing growth, but that very sluggishness is weighing on company plans to grow their businesses in the world’s second largest economy, an annual survey of more than 500 European companies has found. (AP Photo/Ng Han Guan) (Ng Han Guan / Associated Press)

China is actively seeking foreign investment to boost its slowing growth, but that very sluggishness is weighing on company plans to expand their businesses in the world's second largest economy, an annual survey of more than 500 European companies found, The AP reported.

The slowing economy is now the dominant concern of respondents to the European Chamber of Commerce in China survey, which was released Friday. China still ranks high as a place to invest, but the share of companies considering an expansion of their operations in the country this year fell to 42%, the lowest ever recorded.

“The business outlook is the most pessimistic yet, with companies’ expectations for growth and profitability taking a hit, and concerns about competition intensifying,” the chamber said in its business confidence survey.

The economic worries are layered on top of long-running complaints about regulations and practices that companies say favor their Chinese competitors or are unclear, creating uncertainty for them and their employees. Others including the American Chamber in China have expressed similar concerns.

Those older issues are now compounded by the weaker economy, eroding business confidence, said Jens Eskelund, the president of the European Chamber.

“Companies are beginning to realize that some of these pressures that we have seen in the local market, whether it’s competition, whether it’s low demand, that they are taking on perhaps a more permanent nature,” he told journalists earlier this week. “And that is something that is beginning to impact investment decisions and the way they go about thinking about development of the local market.”

The government is launching programs to boost consumer spending but confidence remains low because of a weak job market. Economic growth came in at a faster-than-expected 5.3% annual pace in the first three months of the year, but much of the GDP growth came from government spending on infrastructure and investment in factories and equipment.

Massive investment in industries such as solar power panels and electric cars has created intense price competition, squeezing profits. More than a third of the survey respondents said they have observed overcapacity in their industry. For 15% of the companies, their China operations finished 2023 in the red. Foreign companies need growth in domestic demand, not manufacturing capacity, Eskelund said.

“What is important to foreign companies is not necessarily sort of a headline GDP number — 5.3%, whatever — but the composition of GDP,” he said.

Close to 40% of companies said they have moved or are considering moving future investments out of China. Southeast Asia and Europe are the biggest beneficiaries, followed by India and North America. Nearly 60% said they are sticking with their investment plans for China, but that was down from last year.

“It’s not that companies are giving up on China, it’s just that we are beginning to see other countries emerging as a serious competitor to China,” Eskelund said Friday.

The survey report said “China’s allure as a top investment destination is fading” and warned that companies will pursue opportunities elsewhere unless there are improvements in the business environment.

The proportion of companies that are optimistic about expanding their China business this year fell to about one-third, down from more than half in 2023. Only 15% were optimistic about profit growth.

More than half expect to cut costs in China this year, including 26% who plan to reduce the size of their staffs — which the report said "will further increase the pressure on an already strained job market.”



Arab Automotive Sector Attracts $25 Billion in Foreign Investments Over 22 Years

 A parking lot in Saudi Arabia (Asharq Al-Awsat)
 A parking lot in Saudi Arabia (Asharq Al-Awsat)
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Arab Automotive Sector Attracts $25 Billion in Foreign Investments Over 22 Years

 A parking lot in Saudi Arabia (Asharq Al-Awsat)
 A parking lot in Saudi Arabia (Asharq Al-Awsat)

The Arab Investment and Export Credit Guarantee Corporation (Dhaman) announced that the automotive sector in Arab countries has attracted 184 foreign projects, with a cumulative investment exceeding $25 billion and creating over 102,000 jobs from 2003 to October 2024.
Kuwait-based Dhaman explained, in its fourth sector report for 2024 issued on Sunday, that five Arab countries; Saudi Arabia, Morocco, UAE, Algeria, and Egypt accounted for 79% of the total projects in the automotive sector.
These projects represent an investment cost of more than $22 billion, with a share of 89% of the total sectoral investment, and have created over 91,000 jobs, with a share of 89% of the total.
The report focuses on four key aspects; the development and future of vehicle sales until 2028, foreign trade in vehicles and their components for 2023, in addition to foreign projects in the automotive sector, and assessing investment and business risks related to car sales activity in 2024.
China topped the list of investors in the Arab region, implementing 27 projects between 2003 and 2024, with an investment cost of nearly $8 billion and creating about 20,000 new jobs.
The report highlighted that the top 10 companies in the sector accounted for 41% of the new projects, with a share of 67% of total capital investments, and 58% of the new jobs created.
Japan's Nissan topped the number of new projects reaching 18 projects, with a share of 10% of the total.
However, the Chinese company Human Horizon Group topped in investment value, contributing $5.6 billion with a share of 22% of the total.
Meanwhile, the French company Renault topped in job creation, generating approximately 15,000 positions, with a share of 15% of the total jobs created in the sector.
The report also ranked investment incentives and risks in 16 Arab countries based on Fitch ratings, with Gulf Cooperation Council (GCC) countries leading the list.
Vehicle sales in the Arab region (16 countries) are expected to grow by over 5%, exceeding 2.3 million units by the end of 2024, with a share of 2.4% of global vehicle sales. This figure is expected to reach 3 million units by 2028.
Saudi Arabia, the UAE, Algeria, Morocco, and Kuwait collectively account for approximately 75% of total regional sales.
Private Cars
Private car sales in 12 Arab countries are forecasted to exceed 1.8 million units by the end of 2024, marking a 4.5% rise compared to 2023. Saudi Arabia leads this category with a 45% share of the market. The region's sales are expected to surpass 2.2 million vehicles by 2028, according to Fitch ratings.
The report indicated an increase in the regional vehicle fleet index, reaching an average of 307 vehicles per 1,000 inhabitants by the end of 2024, up by nine points.
This figure is expected to further rise to 353 vehicles per 1,000 inhabitants by 2028, with Libya and many GCC countries exceeding the regional average.
Arab foreign trade in road vehicles and their components increased by 23% in 2023, reaching $126 billion.
This growth was driven by a 29% rise in exports, totaling $29 billion, (bolstered by vehicle re-export activities valued at $14 billion in the GCC separately).
Imports increased by 21%, reaching $97 billion, with 82% of the total trade concentrated in five countries: the UAE, Saudi Arabia, Morocco, Iraq, and Kuwait, collectively accounting for $103 billion.
Japan topped the largest exporter of vehicles and components to the Arab region, recording exports valued at $17 billion, representing 17% of the total. Iraq emerged as the largest importer from the region, accounting for $10 billion 34% of total imports.
Personnel transport vehicles topped Arab imports of vehicles and components in 2023, valued at $63 billion, exceeding 65% of total imports. Vehicle parts and accessories followed, valued at $14 billion, contributing 14% to total imports.