BOFIT Viikkokatsaus / BOFIT Weekly Review 2021/40

At the end of September, the EU Chamber of Commerce in China released its annual position paper. The European Chamber is concerned about increasing evidence that China is turning inward as tensions with the US mount. The change in China can be seen in its increased emphasis on self-sufficiency. Moreover, the national security theme now appears entwined in many more contexts it used to.

The European Chamber noted that ultimately these developments will be manifested as reduced foreign direct investment, lower capacity for innovation, wasted resources, degraded foreign relations and challenges for Chinese firms operating abroad. The European Chamber also sees no evidence of a levelling of the playing field for businesses. Instead, Chinese state-owned enterprises continue to enjoy elevated status. At the same time, the government seeks to increase its control over the private sector and excluded foreign firms from sectors seen as strategically important. According to the European Chamber, the new laws on data infrastructure and data security will likely force European firms to shift their operations out of China. The European Chamber expects that turning inward will reduce the long-term growth potential of the Chinese economy. It recommends that China give up on its self-sufficiency efforts and narrow the scope of its national security concerns.

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