European companies’ confidence in the Chinese market is showing tentative signs of recovery for the first time since 2022. According to the annual Business Confidence Survey released on Wednesday by the European Union Chamber of Commerce in China, the relentless downward spiral in business sentiment has finally eased. European firms increasingly view Beijing as a stable destination for manufacturing and investment, especially as intense political and economic volatility rattles other global markets.
The newly published 2026 survey polled exactly 549 European firms operating across China. The results show that while operating in the world’s second-largest economy remains highly challenging, the gloom has bottomed out. Exactly 68 percent of the surveyed companies reported that doing business in China had become more difficult over the past year. While this number remains high, it represents a solid 5-percentage-point decrease from last year’s record high of 73 percent, the worst year on record for the Chamber.
The survey also revealed a modest rebound in corporate profitability expectations. Exactly 17 percent of respondents said they feel highly optimistic about their two-year profitability outlook. This represents a 5-percentage-point increase over last year’s historic low of 12 percent. Jens Eskelund, the President of the European Chamber, noted that many European firms successfully restored their profitability over the last 12 months, proving that China remains a critical global hub for both industrial innovation and manufacturing.
European executives also reported a welcome decline in the politicization of the local business environment. Fewer than half of the respondents—exactly 47 percent—said China’s business climate had become more politicized over the past year. This represents a decent drop from the 52 percent who made the same complaint during the previous year’s survey. Because of this improved stability, an increasing share of European companies are actually choosing to keep or onshore their operations inside China, relying on the country’s highly competitive and resilient supply chains.
Despite the slight recovery in confidence, Eskelund warned that the rebound remains extremely fragile. European companies continue to face severe economic headwinds within the country. China’s overall economic slowdown remains the most frequently selected challenge expected to impact firms’ future sales negatively. Businesses also continue to grapple with sluggish domestic consumer demand, regulatory uncertainty, market access barriers, and a brutal domestic price war, commonly described in China as “involution.”
The timing of the survey also adds a layer of uncertainty to the positive data. The Chamber originally conducted the poll between January and February, right before a major war broke out in the Middle East on February 28. To measure the impact of this new crisis, the Chamber ran a separate flash survey from April 27 to May 10. The results showed that exactly 79 percent of European firms reported some level of negative impact on their Chinese operations due to the war. Out of those affected, 81 percent reported severe difficulties sourcing basic industrial inputs and components from the region.
The war has also disrupted global shipping lanes, pushing fuel costs higher. This global energy crisis has driven inflation in Europe up by an additional 1.5% over the past month, costing international trade networks more than $1.5 billion every week. In response to these international tensions, China has implemented strict new export controls. The Chamber urged Beijing to make its licensing process much more transparent, warning that its recent restrictions on rare earth metals risk undermining China’s reputation as a reliable global supplier.
Eskelund urged Chinese policymakers to take concrete, decisive actions to restore full investor confidence. He trusted that while the bottoming out of the gloom is a positive sign, the business environment still requires much deeper regulatory reforms to achieve a meaningful, long-term recovery. European firms want to see a level playing field, equal treatment for foreign companies in public procurement, and a more predictable legal environment before they commit to spending billions of dollars in new expansion projects.
For now, the 2026 survey shows that the European business community still views China as an indispensable market. While the massive tech and automotive wars continue to heat up globally, the resilience of China’s supply chains keeps multinational firms anchored in the country. If Beijing can successfully address these regulatory complaints and stabilize its domestic consumption, it will easily maintain its status as the heavyweight champion of global manufacturing for years to come.
