Raphael Stevens

“Zero-Covid has ended, but other headwinds will need to be addressed if China is to regain its attractiveness,” the EU Chamber of Commerce in China said.
There’s “no expectation that the regulatory environment is really going to improve over the next five years,” Jens Eskelund, president of the EU Chamber of Commerce in China, told reporters in a briefing.
European business surveyed said their top challenges were by far economic: slowing growth in China and the world.

Ole Kaällenius (front, r), CEO of Mercedes, signs a memorandum of understanding on cooperation on June 20, 2023, alongside Zhimin Qian (front, l), Chairman of the State Power Investment Corporation, in front of Li Qiang (back, l), Premier of the People’s Republic of China, and German Chancellor Olaf Scholz (SPD, back, r).
Picture Alliance | Picture Alliance | Getty Images

BEIJING – European businesses in China are finding it harder to operate in the country, even after it has re-opened from Covid, the EU Chamber of Commerce in China found in its latest member survey, released Wednesday.
Mainland China ended its stringent Covid controls in December, and authorities pledged to support more business travel in and out of the country.

But an initial economic rebound has lost steam, while regulatory hurdles remain.
“Zero-Covid has ended, but other headwinds will need to be addressed if China is to regain its attractiveness,” the Chamber’s report said.
Its annual business confidence survey found a large increase in companies saying they missed out on opportunities in mainland China due to restrictions on market access or regulatory barriers.
While the survey noted part of those were due to Covid controls, the outlook remains grim.
There’s “no expectation that the regulatory environment is really going to improve over the next five years,” Jens Eskelund, president of the EU Chamber of Commerce in China, told reporters in a briefing.

Ambiguous rules and regulations remained the top regulatory obstacle for respondents for the seventh year in a row, the report said.
China has increased regulation in the last few years. Some targeted alleged monopolistic practices in the internet technology sector, which Beijing had allowed to develop rapidly with few restrictions. Other new regulation has sought to set parameters for personal data protection, similar to privacy rules in Europe.
However, this year China has made clear its emphasis on ensuring national security and expanded its counter-espionage law. News of raids or probes at three foreign consulting firms in China have also rattled business leaders overseas.
Eskelund said foreign businesses still awaited clarity on the new regulation, as they have with rules released more than five years ago.
“I think we will need to see how this actually pans out in reality,” he said. “We are not aware of a great many companies who felt impacted in concrete terms.”

Slowing China growth the top challenge

European business surveyed said their top challenges were by far economic: slowing growth in China and the world. U.S.-China trade tensions ranked third, the report said.
China reported economic data for May that missed expectations and showed a slowdown from the prior month.
“At the end of the day the bread and butter is what we are able to sell,” Eskelund said. “Economic concerns in this instance here [are] being perceived by European companies as more important than politics.”
Anecdotally, he said members were more concerned about China’s economy in recent weeks than when the survey was done.
The study was conducted from February to early March, the chamber said.

Impact on foreign investment

The uncertainty and macroeconomic environment have weighed on foreign investment in China.
The survey found only 55% of respondents said China is one of the top three destinations for future investments – the lowest since the survey began asking the question in 2010.
“We don’t have a single [small or medium-sized company] coming to China since the end of 2019,” Eskelund said, noting that’s based on chamber inquiries at embassies.
China’s Ministry of Commerce did not immediately respond to a CNBC request for comment on this story.
The ministry has called 2023 an “Invest in China Year” and local governments have been trying to court foreign money. Premier Li Qiang also met with German businesses this week in his first trip overseas in the role, which he gained this year, state media said.

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Li is also set to deliver a keynote speech and meet with global business leaders at the World Economic Forum’s conference in Tianjin, China next week.
EU Chamber members appreciate government engagement, Eskelund said, noting that business conditions vary by industry.
Still, he said, over a quarter of surveyed respondents “never expect to see a meaningful opening of the market.” More

Chinese electric car company Nio announced Tuesday it received $738.5 million in new capital from a fund owned by the Abu Dhabi government.
The deal was priced at $8.72 a share, a release said. That’s 6.7% below where Nio’s U.S.-listed shares closed Tuesday.
In the last several months, Middle East investors have increasingly looked for opportunities in China, especially in electric cars.

Nio’s ET5 stands on display at the Central China International Auto Show on May 25, 2023, in Wuhan, China.
Getty Images | Getty Images News | Getty Images

BEIJING — Chinese electric car company Nio announced Tuesday it received $738.5 million in new capital from a fund owned by the Abu Dhabi government.
The strategic investment ultimately gives the fund, CYVN Holdings, a 7% stake in Nio.

The deal was priced at $8.72 a share, a release said. That’s 6.7% below where Nio’s U.S.-listed shares closed Tuesday, down by about half a percent.
Nio earlier this month said lackluster car deliveries was affecting cash flow, and that it was delaying capital expenditure and some research and development projects.
The company said then it had enough cash to support its business. Nio disclosed cash and cash equivalents of 14.76 billion yuan ($2.07 billion) as of March, below what it disclosed for the end of 2021 and 2022.

Middle East interest in China

In the last several months, Middle East investors have increasingly looked for opportunities in China, especially in electric cars.

China-based funds have also looked to Middle East capital as investors from the U.S. and other regions turned cautious on China amid regulatory uncertainty.

Nio said it expects the deal with the Abu Dhabi fund to close in early July, after which they plan to “pursue opportunities in Nio’s international business.”
The agreement also gives CYVN the right to nominate a director to Nio’s board, the announcement said.

Read more about electric vehicles from CNBC Pro More

In a press conference Monday, Blinken noted record high trade between the two countries, and said the U.S. is “prepared to cooperate with China” in “macroeconomic stability.”
Earlier that day, he met with U.S. businesses in China working in health care, automotive and entertainment, the State Department said.
On the issue of Taiwan, Blinken also brought up the economic angle.

US Secretary of State Antony Blinken (L) meets with China’s President Xi Jinping (R) at the Great Hall of the People in Beijing on June 19, 2023.
Leah Millis | Afp | Getty Images

BEIJING — Secretary of State Antony Blinken underscored the importance of the economic aspects of the bilateral U.S.-China relationship during his high-stakes trip to Beijing earlier this week.
In a press conference Monday that wrapped up his visit, Blinken noted record high trade between the two countries, and said the U.S. is “prepared to cooperate with China” in “macroeconomic stability,” among other areas of mutual interest.

Earlier that day, he met with U.S. businesses in China working in health care, automotive and entertainment, the State Department said. The head of U.S. foreign policy meeting with businesses can’t be considered a given on trips of this nature.
“I know particularly when Blinken was [scheduled to be] coming before in February, we lobbied and we were told there was no time for the business community,” Michael Hart, president of the American Chamber of Commerce in China, told CNBC.

Hart said he didn’t know what may have changed since then, but noted similar attention to business when German Foreign Minister Annalena Baerbock visited Beijing in April.
“That would suggest the politicians do very much understand the economic linkages and the importance for political stability between those two economies,” Hart said. “It’s significant.”
The German Chamber of Commerce in China said that during her Beijing trip, Baerbock visited German company Flender, a gearbox manufacturer.

Chairman Colm Rafferty and Vice Chair Roberta Lipson attended the meeting with Blinken on behalf of AmCham China. The U.S. Department of State referred CNBC to Blinken’s press conference Monday when asked about AmCham China’s comment about failing to get a meeting with the secretary during his planned February trip.

Symbolic visit

Blinken met Chinese President Xi Jinping Monday as part of his trip to Beijing, the first visit by a U.S. secretary of State since 2018.
Gabriel Wildau, managing director at consulting firm Teneo, said the most important economic takeaway from Blinken’s trip was that it happened, especially the meeting with Xi.
“The big fear for investors has been that bilateral relations are on an unstoppable downward spiral,” he said. “Just by signaling that relations may stop getting worse, the two sides can reduce pressure on companies to explore options for decoupling.”
Blinken also met with Director of the Chinese Communist Party’s Central Foreign Affairs Office Wang Yi, and State Councilor and Foreign Minister Qin Gang.

Challenges for U.S. business in China

U.S.-China tensions escalated under the Trump administration. It had focused on using tariffs and sanctions in an attempt to address long-standing complaints about the inability for U.S. companies to access the Chinese market in the same way as local firms.
Blinken told reporters at Monday’s press conference that he heard about the problems for U.S. companies in China, and the companies’ desire to grow their local business. He described doing business in China as being in the best interests of the U.S.

Slowing growth

Regulatory challenges aside, a more pressing issue for businesses is slower economic growth in China and the U.S. in the last few months.
The U.S. Federal Reserve has aggressively hiked interest rates in a bid to stem inflation domestically. China’s central bank this month started trimming major interest rates to support growth.
Treasury Secretary Yellen is among the U.S. officials expected to visit Beijing in the near future.

Global macroeconomic stability is one of the items the two countries should work together on, U.S. President Joe Biden said at his meeting with Xi in November, according to a readout. 
On Monday, Blinken listed out similar areas of potential cooperation, including climate and the economy.
He said the growth of major economies such as China is in the U.S. interest and described the economic relationship as “vitally important.”
“But at the same time, as I said, it’s not in our interest to provide technology to China that could be used against us,” he said. 
The Biden administration has used sanctions and export controls to restrict the ability of U.S. businesses to work with Chinese partners on advanced technology such as high-end semiconductors.

Taiwan economics

On the issue of Taiwan, Blinken also brought up the economic angle. He noted that a crisis over the island would likely “produce an economic crisis that could affect, quite literally, the entire world.”
He pointed out that 50% of commercial container traffic goes through the Taiwan Strait every day, and that 70% of semiconductors are manufactured on the island.
Blinken said he made it “very clear” to the Chinese about rising concerns surrounding Beijing’s recent “provocative actions” — and the “dramatic consequences” for the world if a crisis around Taiwan escalated.
Beijing claims Taiwan is part of its territory, and has maintained it seeks “peaceful reunification” with the democratically self-governed island. The U.S. recognizes Beijing as the sole government of China but maintains unofficial relations with Taiwan.
Blinken said a fundamental U.S. understanding is that any differences on Taiwan “will be resolved peacefully.” He reiterated that the U.S. does not support Taiwan’s independence. More

Signage outside Intel headquarters in Santa Clara, California, Jan. 30, 2023.
David Paul Morris | Bloomberg | Getty Images

Check out the companies making headlines in midday trading.
Goldman Sachs — Shares declined 2.2% in midday trading. This past weekend, the firm followed other banks including UBS and Bank of America in cutting its forecast for economic growth in China.

Avis — The car rental company surged more than 6%. Morgan Stanley upgraded Avis to overweight earlier Tuesday.
Chevron, ExxonMobil — Energy giants Chevron and ExxonMobil slipped more than 2% each in midday trading. News of uncertainty around oil demand in China pushed the price of Brent and U.S. West Texas Intermediate crude futures lower Tuesday.
Nike — Shares of the sports apparel company slid nearly 3%. On Monday, UBS said it expects Nike’s guidance for full-year 2024 to fall short of expectations. “We anticipate this type of guide causes the market to revise its NKE earnings expectations lower,” analyst Jay Sole wrote. He trimmed his price target to $145 from $155 but maintained a buy rating on shares. The company will post its fiscal fourth-quarter results on June 29.
Rivian — Shares of the electric vehicle rose more than 4% after Rivian announced its customers will have access to the Tesla charging network in 2024. Rivian’s announcement follows similar moves from Ford and GM.
Intel — Shares were trading 3.8% lower Tuesday. A day earlier, Intel announced it would spend more than 30 billion euros, or nearly $33 billion, on two semiconductor plants in Germany. In an agreement with Intel, the country will also offer a 10 billion euro subsidy package, Bloomberg reported.

Dice Therapeutics — Shares surged 37% after Eli Lilly said it was acquiring the biopharmaceutical company for $2.4 billion. Eli Lilly will pay $48 per share, which is about 40% higher than where shares closed Friday.
Alibaba — The Chinese telecommunications stock pulled back nearly 5% Tuesday. Alibaba announced earlier in the day that Chairman and CEO Daniel Zhang would step down in early September.
Atmus Filtration — Shares rose 5.5% after Wall Street firms Goldman Sachs, Bank of America, JPMorgan Chase and Wells Fargo initiated coverage at buy or equivalent ratings. The stock debuted on the public markets last month.
SoFi Technologies — Shares fell 1.2% Tuesday. SoFi stock has surged more than 70% over the past month after a debt ceiling deal between the Biden administration and Congress included a plan for student loan repayments to restart as soon as August.
C3.ai — The artificial intelligence stock fell 2.2% Tuesday. The company is set to host its investor conference Thursday in New York City.
— CNBC’s Jesse Pound, Alex Harring and Michelle Fox Theobald contributed reporting. More