Investor confidence in China is declining, according to a survey from the European Union. The report comes on the heels of last week's International Monetary Fund's (IMF) announcement of a cut in China’s economic growth forecast.
The European Union’s Chamber of Commerce polled more than 500 of its members. The results show optimism among Western businessmen about the potential to profit in China is at its lowest point since China first opened to foreign markets.
"This year the results were quite, quite surprising in that there was a clear indication that the financial performance of the companies here have not been as strong as they have been in the past," said Adam Dunnett, secretary-general of the EU chamber.
The survey, which was carried out in March, showed 64 percent of respondents reported profitability for 2012, down from 73 percent the previous year. Only 29 percent of respondents had a positive outlook for future profitability. That was also down from 34 percent the year before. The EU report cited market access, labor costs and regulatory hurdles as obstacles to business growth in China.
Mark Secchia, an American owner of Sherpa’s food delivery service in China, says his biggest challenge is increased competition. He opened his company in 1999 and has expanded to four cities across China.
"In one sense it's gotten easier, but that's kind of, in my opinion, made it harder," Secchia said. "[When] I started my business, it was like the wild, wild West and anything goes and, yes, it was difficult to do things, but that was a barrier to entry that kept others away. As things have gotten easier, it's now a worse time to start a business in China because there are so many people doing it and it is so easy to do."
Concerns about China’s continued economic growth also concern Western investors. The nation’s economy grew 7.8 percent in 2012 - its slowest pace in 13 years - and registered a weak 7.7 percent expansion in the first three months of 2013.
In April, the American Chamber of Commerce released a white paper on China highlighting many of the same challenges for American business owners in China. Still, Greg Gilligan, chairman of the chamber, remains optimistic.
“If we stand here and look today, and look at actual results, as opposed to perceptions about the future, the actual results say that businesses are doing well and have maintained good performance over recent years," Gilligan said.
Despite slowing economic expansion and other obstacles cited by the EU survey, China remains one of the fastest growing economies in the world.