Beijing - European business optimism about China at its lowest recorded level - worse than the pandemic - due to slower growth and geopolitical worries.

73% of respondents in the EU Chamber of Commerce said in China’s annual survey that it has become more difficult to do business in Asian countries over the past year, marking a fourth new year high.

This is just one of several record lows found in the annual survey, which has been published since 2004. The latest research released on Wednesday covered 503 respondents in January and February.

"The company does feel squeezed, pessimistic, but once again found a very compelling supply chain in China and needs to continue to exist in the Chinese market," Jens Eskelund, president of the Chamber of Commerce, told reporters this week.

Still, this does not mean that business confidence is about to return.

“We haven’t seen a turning point yet,” Esklund said. “A lot of it boils down to uncertainty.”

The survey reflects how China’s challenges to foreign businesses have increased significantly since the pandemic lockdown in supply chains in 2022. Although local brands have become more competitive, overall consumer demand remains unremarkable amid the inadequacy of real estate and uncertainty in the job market.

Cosmetics companies have been hit particularly. The industry blamed a decline in local demand and reported revenues fell 45% in 2024, the second decline in the past decade.

Aviation and aerospace, on the other hand, are rare industries, saying it has become easier to do business in China.

Slower growth is decreasing China's attractiveness relative to other markets.

In the next two years, only 12% of respondents were optimistic about China's profitability, while the fewest recorded ranked the country as the main destination for future investment. Another record low, with 38% of respondents saying they plan to expand in China in the coming year.

Despite Beijing's announcement of efforts to improve foreign investment conditions, there are still many challenges.

A record 63% of respondents said they missed business opportunities in China last year due to market access restrictions and regulatory barriers. The medical device business that responded said European companies experienced discrimination because of their public procurement practices that benefit domestic participants.

The pessimistic scale echoes the annual survey of U.S. companies released in China in late January, which shows a record share of U.S. businesses is accelerating plans for relocation manufacturing or procurement.

Meanwhile, 53% of respondents said they would increase their investment in China if more action is taken to improve access to local markets.

Eskelund said China's ability to deliver quality parts at the lowest prices in the global supply chain remains dominant, the only way for businesses to stay competitive, and Eskelund has spoken with hundreds of companies across the Chamber of Commerce in China over the past three weeks.

When asked about supply chain diversification, more than a quarter of respondents said they were logging in to China, a way to meet localization requirements and better reach the domestic market.

Of the 10% of respondents, 10% have a much smaller share, who are building alternative supply chains overseas while retaining their existing networks in China. The survey also found that nearly half of respondents said their Chinese suppliers would also move operations to other markets.

In July, Chinese and EU leaders will hold a summit in Beijing in July as both attempt to strengthen bilateral ties on U.S. tariffs. The EU is China's second largest trading partner.