European firms are cutting costs and pulling back on investment plans in China, according to an annual survey released Wednesday, as the country’s economic slowdown and intensifying local competition continue to squeeze profit margins and dampen business sentiment.“The picture has deteriorated across many key metrics,” states the European Union Chamber of Commerce in China in their Business Confidence Survey 2025 introduction.The difficulties mirror broader challenges within the Chinese economy, which is affected by an extended property sector crisis impacting consumer expenditure. Additionally, China faces increasing resistance from Europe and the United States regarding export surge.The factors driving Chinese exports upward are simultaneously dampening business prospects within China. Local enterprises, often supported by government incentives, have invested extensively in sectors like electric vehicles, resulting in production capacity exceeding market demand.This excess capacity has triggered intense price competition, reducing profits and encouraging companies to expand into international markets.In Europe, concerns are rising that increased Chinese imports could affect domestic manufacturing and employment. The EU implemented duties on Chinese electric vehicles last year, citing unfair subsidisation of EV production.“I think there’s a clear perception that the benefits of the bilateral trade and investment relationship are not being distributed in an equitable manner,” stated Jens Eskelund, EU Chamber in China president, during a recent press briefing.While acknowledging China’s efforts to enhance consumer spending, Eskelund emphasised the need for government action to balance supply growth with demand.The survey findings indicate increased pressure on profits over the past year, with business confidence continuing to decline, he continued.Approximately 500 member organisations participated in the survey conducted between mid-January to mid-February. “It is just very difficult for everyone right now in an environment of declining margins,” Eskelund added.