EU Business Confidence in China Hits Inflection Point
0h ago|4 min readStandard
Fazen Markets Editorial Desk
Collective editorial team · methodology
china-business-confidenceeu-chamber-of-commerce
Fazen Markets Editorial Desk
Collective editorial team · methodology
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Jens Eskelund, President of the European Union Chamber of Commerce in China, announced on 27 May 2026 that the business group's latest survey indicates an inflection point in confidence among European firms operating in the country. The assessment, delivered in an interview with Bloomberg, points to a potential stabilization of sentiment after a multi-year downturn. This development surfaces as key Chinese-linked equities, such as NIO, trade with significant volatility, with the automaker's shares at $5.26, down 6.07% today amidst a trading range of $5.20 to $5.38 as of 06:09 UTC today.
Business confidence among foreign firms in China has been under pressure since 2018, exacerbated by stringent COVID-19 lockdowns, rising geopolitical tensions, and a protracted property sector crisis. The last comparable positive inflection in the Chamber's Business Confidence Survey occurred in 2017, before the onset of the US-China trade war. The current macro backdrop remains challenging, with China’s economy grappling with deflationary pressures and weak domestic demand, complicating the operating environment for export-oriented European companies.
The catalyst for this shift appears to be a combination of incremental policy support from Chinese authorities and a stabilization in the global economic outlook. Recent targeted stimulus measures aimed at specific industrial sectors may have provided a floor under sentiment. The change also coincides with a period of heightened diplomatic engagement between European and Chinese officials, seeking to manage trade frictions.
The Chamber's survey, a key barometer for foreign direct investment sentiment, historically correlates with capital expenditure decisions by multinational corporations. While specific figures from the latest report were not all disclosed in the initial announcement, historical data provides a benchmark. The 2025 survey showed a record low, with only 45% of respondents viewing China as a top-three investment destination, down from a peak of 86% in 2013.
| Metric | 2023 Level | 2025 Level | Change |
|---|---|---|---|
| Firms Optimistic on Growth | 51% | 32% | -19 pp |
| Firms Reporting Revenue Growth | 60% | 42% | -18 pp |
The current inflection point suggests these negative trends may be bottoming out. The market reaction is already visible in specific equities; NIO's 6.07% decline to $5.26 reflects ongoing investor caution toward China-centric consumer sectors, underperforming broader global indices like the S&P 500.
A sustained recovery in confidence would disproportionately benefit European industrial and luxury goods sectors with heavy China exposure. Companies like BMW and LVMH, which derive significant revenue from the Chinese market, could see a re-rating if the sentiment shift translates into improved sales. Conversely, a fragile recovery poses risks for suppliers and manufacturers embedded in Chinese supply chains, who remain vulnerable to any policy reversals.
The primary counter-argument to this optimism is that an inflection point does not guarantee a strong V-shaped recovery. Sentiment could plateau at a low level if concrete improvements in market access and regulatory predictability fail to materialize. Market positioning data from futures markets indicates that short interest on China-focused ETFs remains elevated, suggesting many institutional investors are yet to be convinced of a durable turnaround.
The sustainability of this confidence shift will be tested by several imminent catalysts. Key releases include China’s official Purchasing Managers' Index (PMI) data for May, due on 31 May 2026, and the European Chamber’s full survey report, expected for publication in mid-June. These data points will provide concrete evidence of whether improving sentiment is reflected in actual business activity.
Analysts will monitor the USD/CNY exchange rate, watching for any breach of the 7.25 level, which could signal renewed capital outflow pressures. For equities like NIO, the $5.00 price level represents critical technical support; a break below it could trigger further selling. The next major earnings season for European multinationals in late July will be the ultimate test, offering hard data on Chinese revenue performance.
An inflection point signifies a change in the direction of a trend, in this case suggesting that the prolonged decline in European business confidence in China may be ending. It does not necessarily indicate a rapid improvement but rather a potential stabilization or bottoming out. This is a leading indicator, often preceding changes in investment plans and capital allocation by six to twelve months.
While this survey reflects European sentiment, the underlying factors affecting business conditions—such as regulatory clarity, economic growth, and geopolitical relations—impact all foreign firms. Improved European confidence could signal a broader ameliorating environment, potentially benefiting American companies with significant China exposure. However, US firms face additional unique pressures from bilateral trade and technology policies.
The EU Chamber's Business Confidence Survey has been conducted annually for over two decades, making it one of the longest-running and most respected gauges of foreign business sentiment in China. Its results are closely watched by policymakers and investors as a reliable proxy for the health of the foreign investment climate, often influencing sovereign risk assessments and asset allocation decisions into emerging markets.
European business sentiment in China shows tentative signs of stabilizing after a severe multi-year decline.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. CFD trading carries high risk of capital loss.
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