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EU firms in China considering shifting investment

Rising costs and regulatory challenges are the biggest issues facing European companies in China, according to an annual survey conducted by the European Union Chamber of Commerce in China.

About 22% of its respondents are considering shifting investments away from the country. The survey was based on responses from 557 companies, given in a two-week period in February.

Though European companies are continuing to invest and create jobs in China, the lack of reform of the regulatory environment is worrying and has a disproportionate impact on foreign business as well as on the domestic private sector, according to the report.

Still, the chamber’s report said the European firms continue to put money in China. A little more than 60% of them plan new investments there, more than half are looking at entering new provinces, and almost three-fourths of them plan to hire more staff in the next two years.

As China’s economy has grown quickly amid problems in Europe – China contributed the most in real terms to global growth for the sixth consecutive year – the country has become a more important market.

Chinese operations now make up 10% of worldwide revenue for half of the survey respondents, up 50% from 2009.

But the report also hit at growing frustration that the reforms of the 12th Five-Year Plan are not being carried out and says that China’s regulatory environment is continuing to discriminate against foreign companies.