The European Business in China Business Confidence Survey (BCS) 2020 reported that European companies were “navigating in the dark”. Amidst the plethora of standard concerns over market access, level playing field and regulatory reform, the COVID-19 pandemic upended economic norms. In a separate February 2020 joint survey of members of the European and German chambers of commerce in China, half of respondents reported expectations for a year-on-year (y-o-y) decrease in revenue, with a paltry 0.5% expecting any increase. Companies spoke extensively of making their global supply chains resilient and diversifying into other markets. 

Contrary to those expectations, European companies in China found themselves in a resurgent market after production went back online far quicker than had been initially anticipated. Though y-o-y revenue shifts were the worst in a decade, 42% of respondents actually saw revenues increase in 2020, with the biggest surges in business-to-consumer (B2C) industries like retail and automotive. This was largely thanks to Chinese customers who, unable to travel, used more of  their disposable income to purchase cars, cosmetics and clothing instead. At the same time, a quarter of respondents saw revenues decrease, with the worst hit in service industries like legal and aviation. 

Yet, despite the notable downward shift in y-o-y revenues, three out of four companies ended the year with positive earnings before interest and tax (EBIT), the same share as have been profitable for the last five years. China became a critical pillar in the global operations of many European multinationals, with 51% of companies reporting that their EBIT margins in China were higher than their worldwide average, a 13-percentage point increase from the previous year. Looking forward, 68% of European companies in China are now optimistic about growth, a 20-percentage point increase y-o-y.