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Spring 2022 survey of French enterprises in China - Economic and human resources landscape in the current crisis status

PRESS RELEASE - 05/25/2022

French companies are highly impacted by the stringent COVID-19 containment measures and the situation in Ukraine

 

With more than 2100 subsidiary companies employing close to 445000 people, France is the first European investor in China by the number of companies. With its 1600 members, the French Chamber of Commerce and Industry in China (CCI FRANCE CHINE) represents the interests of French companies since 1992.

In the continuation of the surveys conducted by other foreign chambers of commerce in China (including the European Union, Germany, and the United States), the French Chamber of Commerce and Industry in China (CCI FRANCE CHINE) interrogated its members between April 1st and May 9th regarding the economic activity of French companies. 200 companies responded to the survey.

  • COVID-19 restrictions, leading in recent weeks to full or partial lockdowns across numerous cities accounting for 40 % of China’s GDP, have an impact on investment strategies of the vast majority of subsidiaries in China (80 %); 16 % consider reducing their presence in the country. The image of China has degraded in the eyes of their headquarters (76 %), notably as an investment destination (64 %) and for conducting R&D activities (36 %). Current COVID-19 restrictions strongly hamper the management of foreign human resources (85 %). Consequently, half of the respondents replace expatriate staff with local employees, two thirds of them citing entrance restricting into China and the loss of attractiveness of China. This trend, if it were to last, risks to deteriorate the communication between subsidiaries and the headquarters in France (68 %).
  • 80 % of subsidiaries are affected by the gradual decoupling between China and the rest of the world, which impacts their supply chains (48 %), the management of personal data (43 %) and legal compliance (40 %). More than half of companies impacted by the trend of “decoupling” consider to regionalize their presence, namely by remaining in China solely to meet the demands of the Chinese market.
  • China’s intellectual property regime (56 %) and the regulatory environment (51 %) count amongst the main challenges faced by French firms.
  • Nevertheless, China remains an attractive destination for innovation in the eyes of French subsidiaries (86 %) and their headquarters (72 %); 54 % of the companies invest in R&D in China. The high potential of the Chinese market is well known to French companies; 37 % of subsidiaries still consider extending their investments.
  • Respondents are also impacted by the consequences of the invasion of Ukraine (37 %), because of supply chain disruptions (55 %), a fall of their revenue (32 %), and the increase in energy prices (30 %).

The challenges met by French firms in China are significant and the attractiveness of China risks to suffer a lasting damage if the current COVID-19 restrictions were to be maintained. More specifically, it is high time to facilitate the arrival of expatriate workers in China after more than two years of strict border restrictions, by increasing international air traffic services, issuing visas, and improving quarantine conditions (housing, predictability, separation of families). These are essential factors to deepen industrial cooperation and foster the development of commercial opportunities for French and Chinese companies. For our commercial exchanges and bilateral investment flows to continue thriving, a transparent, predictable and fair business environment are necessary.

 

Read the report of the survey here.

Consulter le rapport de l'enquête ici.

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