The blues of French companies in China

The blues of French companies in China
The blues of French companies in China

Posted Sep 23, 2022, 2:12 PMUpdated on Sep 23, 2022 at 3:18 PM

The leaders of French companies in China are in low spirits. Long accustomed to explosive growth and a clear horizon, they are now navigating in full fog in a country which is locked into a “zero Covid” strategy at an economic cost that is heavier every day.

Health measures (partial or total confinement in many cities, difficulty of travel in the countries, quasi-closure of borders, etc.) “weigh on the activity of French companies in China and risk permanently damaging the attractiveness of the country. “Warns the French Chamber of Commerce and Industry (CCI) in China.

The survey conducted among 303 subsidiaries in the first half of September shows a very marked deterioration in the business climate. Half of the subsidiaries saw their turnover affected by the health situation in China and nearly two-thirds recorded a drop in their profits. The world’s second-largest economy has suffered a sharp slowdown since the spring as Beijing pursues a strategy of total elimination of Covid-19, at the cost of extremely strict and further reinforced measures in view of the Party Congress to be held in mid-October in Beijing.

“I have rarely seen such a low tide and I am completely in the dark to establish my 2023 budget”, confides a French executive in Shanghai. The “zero Covid” and its economic cost weigh not only in the short term but “have consequences on the investment strategy of most subsidiaries of French companies (58%)”, points out the CCI, which received pressure not to make the study public.

No development plan

Now, 43% of respondents indicate that they have no development plan in China for the next three years. They were only 27% during the previous CCI survey carried out last spring, in full confinement in Shanghai. Conversely, only 23% are considering increasing their investments, compared to 37% in the spring.

“The French subsidiaries are in a state of apnea and in a waiting situation which will continue until they see a scenario emerge from this ‘zero Covid’ policy”, estimates Christophe Lauras, president of the CCI France China. Added to this is the growing caution of Parisian head offices with regard to China. The tensions around Taiwan, the Chinese economic slowdown, the lack of visibility, the difficulty in replacing expatriates do not encourage risk taking.

“French companies are struggling to attract foreign talent,” observes Christophe Lauras. Quarantines on entry into China, the risk of finding oneself in confinement at the slightest positive case of Covid 19 in one’s city or near one’s home, almost daily PCR tests, the difficulties of travel in the country do not attract candidates and accelerate the sinicization of French subsidiaries.

More than half of the companies surveyed report a drop in the share of expatriates in their workforce. The total confinement of Shanghai for two months in the spring brutally accelerated the departure of the French community to China.

The article is in French

Tags: blues French companies China

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