European firms are cutting costs and reducing their investments in China, according to the 2025 Business Confidence Survey by the EU Chamber of Commerce in China. The survey highlights a tough business climate shaped by slowing demand, fierce price wars, and growing trade tensions.
For the average business or consumer, this means fewer European brands expanding in China, and possibly fewer China-made products flowing into Europe. What was once a win-win trade route is starting to feel one-sided—and lopsided trade is bad business.
From Boom to Bust: The Harsh New Reality
The Chinese economy, long seen as a growth engine, is sputtering. A deep real estate crisis has hit consumer confidence hard. As people spend less, companies earn less. Meanwhile, Chinese manufacturers, often backed by government subsidies, are churning out more than the market can handle—especially in sectors like electric vehicles (EVs).
This leads to a brutal scenario: too much supply, not enough demand, and a race to the bottom on prices.
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Price Wars Are Killing Profits
EU Chamber President Jens Eskelund summed it up: “It is just very difficult for everyone right now in an environment of declining margins.” And it shows. Around 500 companies took part in the latest survey. A large majority reported falling profits and a bleaker business outlook.
Instead of expanding, many are scaling back. This isn’t just about money—it’s about trust. When you keep pouring in effort but get squeezed by low prices, tight regulations, and lopsided trade benefits, even the most patient firms start to walk away.
Trade Tensions Rise
Europe isn’t just watching—it’s pushing back. The EU slapped tariffs on Chinese EVs in 2024, citing unfair subsidies. And there’s growing pressure to do more. As Chinese companies flood global markets with cheap goods, fears rise that Europe’s own industries could be wiped out.
Eskelund added that China must act fast—not just by encouraging consumers to spend, but by fixing the root problem: overcapacity.
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Is the Golden Era Over?
For years, European firms bet big on China. But now, the return on that bet is shrinking. The 2025 survey shows that confidence hasn’t just dropped—it’s still falling.
It’s not just an economic story. It’s a reality check. The golden era of smooth trade and shared growth is behind us. What’s ahead? A slower, colder, and much more cautious partnership.
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