BEIJING – European companies are streamlining their operations and reducing investment initiatives in China due to the slowing economy and intense competition pushing prices lower, as highlighted in an annual survey released on Wednesday.

The difficulties faced by these companies signify the broader economic challenges in China, primarily stemming from a lingering real estate crisis that has negatively impacted consumer spending. Furthermore, Beijing is dealing with increasing opposition from Europe and the United States regarding its escalating export levels.

“The situation has worsened across numerous key indicators,” stated the European Union Chamber of Commerce in China in the introduction to its 2025 Business Confidence Survey.

The same forces that are driving up Chinese exports are depressing the business outlook in the Chinese market. Chinese companies, often enticed by government subsidies, have invested so much in targeted industries such as electric vehicles that factory capacity far outpaces demand.

The overcapacity has resulted in fierce price wars that cut into profits and a parallel push by companies into overseas markets.

In Europe, that has created fears that growing imports from China could undermine its own factories and the workers they employ. The EU slapped tariffs on Chinese EVs last year, saying China had unfairly subsidized electric vehicle 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,” Jens Eskelund, the president of the EU Chamber in China, told reporters earlier this week.

He applauded efforts by China to boost consumer spending but said the government must also take steps to ensure that supply growth doesn’t outpace that in demand.

The survey results show that the downward pressure on profits increased over the past year and that a fall in business confidence has yet to bottom out, Eskelund said. About 500 member companies responded to the survey between mid-January to mid-February.

“It is just very difficult for everyone right now in an environment of declining margins,” he said.