00:00From what you're seeing on the ground, it looks like business confidence is improving.
00:07Indeed, it looks like we might have turned the corner. It's too early to tell, we think,
00:12because it is one isolated data point. But what we can see is that relative to last year,
00:17which was the poorest year that we have on record, we can see that we are back to work
00:22where we were in 2024. So yes, there has been an uptick. We think there are many reasons.
00:29One reason is that we are living in a very volatile world and China perhaps offers
00:33relative stability. Another thing is that we have seen European companies engaging in
00:39aggressive cost-cutting. We have seen European companies turning to more lucrative, profitable
00:44export markets and perhaps also a little bit of crisis fatigue. You know, companies are simply
00:50getting used to that we are living in this very unstable world and sort of this is becoming
00:55the new normal. So we think that there are many reasons that this might happen.
01:00What would be interesting, of course, would be to see if this would be a sustained change in sentiment.
01:07Yeah, I guess the proof is in the pudding, so to speak, because we are also speaking at the time
01:12where it looks like on the regulatory front, China is tightening things. I mean, you look at some of
01:20these related headlines on AI professionals, travel restrictions. I mean, what do European
01:26businesses in China want to see more of? What is left to do?
01:33Yeah, we still think, I mean, if we look back at 2025, the big story was export controls and that
01:39matter is still not resolved. We have the Busan agreement expiring by the 10th of November. It's
01:46less than six months from now. We still don't know if there will be an extension. That would be a
01:51really, really big one for European and other business if that is not getting resolved. And then,
01:58of course, we are seeing that China is beginning to develop an extraterritorial regulatory toolbox
02:04similar to what we see in the United States. And sometimes some of these regulations are direct
02:09contradictions with each other. This is something that creates uncertainty. We don't know how to comply
02:14sometimes, in particular, if there are contradictions. So I think there's a lot of uncertainty on the
02:19regulatory agenda right now. Jens, what we're hearing from some of the other chambers,
02:26Amcham and Hong Kong in particular, just a few months ago, was that there seems to be more
02:30businesses willing to come back to China because now that you see tariffs are in some ways relatively
02:37more, you know, we're back down, still comparative to the rest of the region here. And, you know,
02:43they really can't find another market that is as efficient as China and the supply chains there.
02:49Are you starting to see that sort of trend and people coming back and businesses coming back to China now?
02:54I think it's a very, very interesting question that you raised there. We actually don't see a lot of new
03:00companies coming here. But what we do see is that existing companies are actually increasing their
03:06onshoring in China. And I think this is something that will concern European regulators when they look at that.
03:13We saw very clearly last year, we see it actually even stronger today, that a full 32% of our
03:19members
03:20tell us that they are increasing their onshoring in China. Only 7% are increasing their offshoring
03:25out of China. So if anything, Europe is getting more dependent on China, not less. Another thing that
03:31we see is a fragmentation of supply chains that, you know, under influence from all of this geopolitical
03:37volatility, we're beginning to see a supply chain complexity on the increase. We see regionalization,
03:44we see companies exporting to ASEAN for final assembly and then further export out. So things
03:50are getting more complicated. But definitely, in regard to onshoring, there's an upside for China
03:55right now.
03:57And I like this interesting effect here when it comes to R&D and how competitive things are right
04:03now that more members are now reporting that Chinese firms in their industry as more innovative
04:08than European ones. Are there certain sectors that are driving this sort of perception shift? And
04:13how do they compete, given that, you know, China is pushing towards more self-reliance now?
04:20Yeah, I think an obvious one is automotive and green technology and also pharma, where China has been
04:28investing very, very heavily in R&D. I think it's both a challenge and opportunity for European business.
04:35A lot of very exciting things are happening in China. And if European companies are able to tap into
04:41that on the ground in China, that certainly can provide an opportunity and a benefit. But it is
04:46perhaps also a signal that European business really needs to be observing what's happening here. They
04:52need to continue to invest. They need to continue prioritizing R&D. So I think there's a way out,
05:00but certainly you need to be aware of what happens here on the ground.
05:06Jens, are the businesses that you represent also, you know, a bit more or less concerned about
05:12the transfer of technology and the worry surrounding that?
05:17Sorry, could you please repeat that?
05:21Are the businesses that you represent more or perhaps less concerned about the transfer of technology,
05:28which of course is a key issue among businesses, especially with AI being such a strategic asset,
05:35given the way how both the Europeans and the Chinese might be viewing this?
05:39Yeah, that actually remains a concern for European business. And that's where a little bit
05:44unexpected that we saw that the concern in regard to IPR protection actually have increased. We have
05:5139% of our members telling us that, you know, they are experiencing IPR infringements and that
05:58they don't feel that the enforcement of IPR regulations is sufficient and adequate. The thing is,
06:06actually, that our members are telling us they're pretty happy with the regulatory environment when
06:10it comes to IPR protection. It's the enforcement really that's a problem now. And I think this is
06:15something that weighs heavily when companies are considering whether to transfer technology to China.
06:21So clearly, there's an opportunity for China also, if it improves on its IPR protection,
06:27enforcement. The regulations are there. Now it's about enforcement.
06:31Yeah, you mentioned in the report about quick wins, Jens. What could be actionable in terms of reforms
06:37in the near term? I think a big one that is to establish clarity of the export controls. That was
06:44a big
06:44theme last year. We had a third of our members that were directly impacted by these export controls. If the
06:50agreement falls apart, it'll be even more companies. I mean, what we need in order to be able to continue
06:56to invest and develop and prioritize China, that's predictability and reliability in the market. And
07:04having clarity on some of these issues really would be a big support and create confidence. IPR is another
07:13issue. And then we see also at local levels that there are a lot more that local governments can
07:18do to support businesses, in particular, the small and medium-sized enterprises. Cross-border, then data
07:24transfers, money transfers outside of China, movements between districts, honoring commitments
07:33for subsidies, for subsidies, and so on and so forth. So we think that a lot of things that China
07:37can still do.
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