• China’s imposes “inflexible” COVID-19 restrictions.
• Corporate politisation are harming the country’s reputation.
• Businesses are beginning to perceive China as “less predictable.

According to a leading European business organization, China’s “inflexible” COVID-19 restrictions and corporate politisation are harming the country’s reputation as a place to invest.

According to a survey released on Wednesday by the European Union Chamber of Commerce, businesses are beginning to perceive China as “less predictable, trustworthy, and efficient” as a result of the country’s pragmatic policymaking and elevation of ideology over the economy.

The industry has experienced “unprecedented disruptions,” according to the business advocacy organization, as a result of Beijing’s rigid “dynamic zero COVID” policy. Favoritism for state-owned firms has also been blamed for contributing to the decline in confidence.

The trade group, which represents more than 1,700 European companies operating in China, claimed that most businesses had entered a “wait-and-see” mode and started to consider alternative markets, with a small number of large companies accounting for the majority of European investment over the previous four years.

The industry association stated in a press release that “ideology is trumping the economy” and that “in the past Beijing’s reform strategy served to assure stability, propel economic growth, and permit massive inflows of foreign direct investment.”

To regain business trust, the European Chamber of Commerce recommended that Beijing implement “complete market reforms,” which would necessitate allowing decision-makers the political leeway to “‘make mistakes,’ explore ideas, and eventually shift course.”

According to Jörg Wuttke, president of the European Union Chamber of Commerce in China, “European companies are still eager to contribute to China’s economic development, but investment into the country is unlikely to increase while China keeps its doors closed and companies perceive political, economic, and reputational risks to be mounting.”

In order to connect their activities in China with corporate commitments and new supply-chain legislation in the EU and the US, companies are pleading for greater openness in the business climate.

China is the final significant economy to employ harsh measures like border checks and lockdowns as part of a zero-tolerance policy designed to eradicate COVID-19 at nearly any cost.

The world’s second-largest economy has suffered greatly as a result of the divisive policy; nonetheless, it narrowly averted contraction in the second quarter thanks to a 0.4% increase in gross domestic product (GDP).

Beijing has justified the measure as essential to saving lives and has cautioned against “laying flat” in the face of the virus.