'The question for many companies is: Is the reward still worth the risk?'

In its latest position paper, the EU Chamber of Commerce spoke of a "tipping point " for European companies. Can you tell us what the current situation looks like?

Many European companies have done well in China over the years despite many challenges and hurdles they face in developing and foreign economies. However, more recently, the rewards and returns on investment here simply do not keep up with the increasing challenges that companies face.

Is there still some optimism?

We still see the potential in the market. But the risks and the uncertainty have just reached a level right now where, frankly, some companies can look elsewhere in other markets around the world and can get the same marginal return or more. Diversification also brings some additional layer of security that some companies are looking for in a more politicized business environment. We believe that these are some of the key reasons that have resulted in a decrease in foreign direct investment that we have seen over the last few years. It is a real lost opportunity because we think the market still has significant potential. It just does not have the supporting framework for it right now to give the confidence to the companies to make those investments.

The Chinese government recently announced a major economic stimulus. Does that change your view?

I personally don't think a stimulus is the answer. I think some of the regulatory reforms we are asking for would be much cheaper and more efficient. There is sufficient liquidity already in the market, but Chinese consumers are also not spending as much as they used to. There is a lack of confidence, causing consumers to save for rainy days, particularly in the absence of strong social safety nets. On the supply side, investors need to see a positive return on their investment. Lowering interest rates may not be enough. Many sectors suffer from overcapacity: coal, cement, steel, apparel, electric vehicles, textiles, solar and panels, etc. It is a very challenging market right now. And so, the question for many companies is: Is the reward still worth the risk?

What are the biggest hurdles currently?

The number one challenge, first and foremost, is the economy. People are concerned about the trajectory of the economy. We think it needs a full-out effort to address all the different ways to let market forces play a more dominating role in the economy. Two areas where we have been most active in the last year are procurement and cross-border data transfer. Many companies that used to do very well in terms of procurement as a part of their business have seen a decline. And despite the comments about equal access to procurement, that's not the reality. That's not the message that I hear from our members. The other area is cross-border data transfer. These were issues that were very painful for us last year. The cross-border data restrictions (CBDT) really put a chokehold on companies' ability to innovate.

Do you see any positive developments?

Yes, we have seen several improvements. This summer, we got a number of CBDT approvals in many sectors, from pharma to medical devices to IT. The negative list has been reduced, and China has eliminated some remaining joint venture requirements. China has also announced many goals. It aims to attract more foreign investment, create new quality productive forces and open up further. The Ministry of Commerce, at all levels, is doing a lot to get that message out and encourage companies to expand and invest in here. However, they are not the sole decision-makers when it comes to investment approvals and the additional regulatory concerns our members face.

The EU has approved the tariffs on Chinese electric vehicles. Are European companies in China afraid of reprisals?

Yes, European industries in other sectors are worried that they could be subject to investigations as well. This is already a reality for some. It is exactly the sort of lack of predictability that really discourages companies from investing. You think that this is only an auto industry issue, and not related to your sector, and then 'bam' you are reading about your sector in the news the next days as possible subject of investigations.

My advice is to keep calm. China has invested so much into the e-vehicle industry, and it has reaped a number of real technological advances. China's e-vehicle prowess is here for the long-term. So likewise, China needs to think long-term. I strongly believe it is in its interest to ensure a degree of market stability. Further, by identifying win-win-relationships with its partners, I believe it can help it maintain access to those markets accordingly. This is actually very similar to what foreign companies have experienced in China.

Adam Dunnett is the Secretary General of the European Chamber of Commerce in China, having previously served as Chairman of EBO Worldwide Network and worked at APCO and the Canadian Embassy in Beijing.

We see several major challenges. First, the economic slowdown is affecting nearly everyone. Profitability and revenue outlook are at record lows. Second, although market access has improved on paper, the regulatory environment for our members has become increasingly difficult. Third, we face a much more politicized environment, which adds to general business uncertainty. National security has become a real focus of the economy here in China. A lot of the initiatives focus on self-reliance, dual circulation, autonomous innovation.