European companies face increasing difficulties in China

European companies in China are concerned about the growing political risks of doing business in the country. They fear more often that they will be the victims of arbitrary punishments in China, but they also see increasing pressure at home to account for the companys activities in the Peoples Republic of China.

In the annual report of the European Chamber of Commerce, a lobbying club, almost half of companies say they experience increasing political pressure from the Chinese government. Forty-three percent of those surveyed point to Chinese state media, often a grateful tool for Beijing to put pressure on countries, companies and individuals.

That fear is not out of thin air. After dissident Liu Xiaobo was awarded the Nobel Peace Prize in 2010, a boycott of Norwegian salmon was announced via the Chinese state media. The arrest of the daughter of Huawei founder Ren Zhengfei in Canada was reason for China to stop importing Canadian rapeseed oil.

In the military field, too, China is increasingly flexing its muscles, explains correspondent Sjoerd den Daas in this explainer:

Most recently Australian exporters of barley and beef have been facing high import duties and restrictions on the Chinese market. That happened after the countrys Prime Minister called for an independent enquiry into Covid-19, and Chinese provocations in the South China Sea were criticised.

The President of the European CoC, Jรถrg Wuttke, also sees increasing pressure on companies from outside the Peoples Republic of China. “Hong Kong, the South China Sea, Tibet and the Uighurs in Xinjiang: files that are also causing a great deal of commotion in our home markets, in our parliaments, says Wuttke. “Not least among consumers too. We are under increasing pressure to account for how we do business in China,” he notes.

Investing in Xinjiang is suicide

In that light, Wuttke warns that investing in Xinjiang means suicide for companies. “That is inexplicable,” he says. “We are under great pressure from all our stakeholders, with a consumer boycott as a nightmare scenario. I hope that the Chinese authorities also understand that public opinion in our home market plays an important role in how we run our businesses here”

Activists from various corners have already called for a boycott of Mulan, the latest Disney film, in recent weeks. For the shootings, the company in Xinjiang cooperated with the local department of the Ministry of Public Security, which is partly responsible for the detention of Uighurs and other Muslim minorities in re-education camps.

Leaving China is not an option either

It is still too early to say to what extent consumers are actually responding to the calls for a boycott: there are no figures yet. For Wuttke, however, it is clear that there is work to be done by European companies to avoid such a scenario. “Few companies have screened their production chains in Xinjiang to make sure there are no irregularities,” he says. “If you are already operating there as a company, extreme transparency is the only right thing to do”

Despite the increasing complexity, few companies are considering turning their backs on the country. “From an economic perspective, that would make no sense either,” says Wuttke, who still has a wish list for the Chinese government. “We do want better access, as Chinese companies enjoy in the European Union. Unfortunately, for many sectors, we still do not have access to the platform until the train has left