European companies have grown more hesitant about their R&D investments in China, according to a survey published by the European Union Chamber of Commerce in China. While confidence in China’s business environment took a hit from its stringent zero-Covid policy, companies expect this to be restored. The impact of geopolitical tensions, on the other hand, is only expected to worsen. China’s push for self-reliance as well as the fallout of US sanctions is cause for concern too, as companies fear their Chinese customers might start to prefer products that are wholly China-made or at least devoid of any US components.
“European companies in China that are competing fiercely for market share often see R&D localization as their ticket to staying ahead of the curve,” says Joerg Wuttke, president of the European Union Chamber of Commerce in China. “However, a notable tempering of future R&D investment ambitions among multinationals shows that perceptions about China’s innovation ecosystem reflect broader business sentiment, which has been greatly eroded by the increasing unpredictability of doing business in China.”
The size of the market, strong demand and the fast pace of commercialization of R&D results are seen as attractive features of China. Long-standing issues such as weak intellectual property rights protection and an unlevel playing field for foreign companies are also still holding back European investments in R&D.