Rise in EU cosmetic company investment in China

The president of that chamber, Davide Cucino noted that the increase in interest in the Chinese markets is down to more opportunities companies perceive to be promised by the country's new leadership as it seeks further economic growth through reform.

Speaking at a news conference on the release of a business confidence survey for 2013 conducted by the chamber and Roland Berger Strategy Consultants, Cucino attributed the huge market demand in China as one of the reasons continued investment is being attracted from EU companies.

He revealed that the survey found out of 550 European companies with a presence in the Chinese market for more than five years, 86 per cent to be considering further investment to expand operations in the market while 41 per cent were planning merger and acquisition deals this year.

A shift in focus​

That same survey also revealed that more than half of the European companies are planning to expand their business from first-tier cities to the second- and third-tier cities in China, with interest growing in the western region of the country.

And that businesses are now shifting their focus to the cities like Guangdong and Chongqing. "In recent years, the large-scale development strategy in the western region has drawn global attention, making the region a hot investment area for foreign companies​."

While Kang Yan, senior partner at Roland Berger Strategy Consultants added that the sector where this tendency becomes apparent is the consumer goods industry. "Chinese consumers now have more options on daily necessities from both foreign and local brands. Domestic daily necessities and cosmetics companies are becoming more competitive."​

Still, some report challenges in the market​

Yan goes on to reveal that despite European consumer goods and service firms heading up the list of those that regard China as a priority market, some companies operating in the country reported an increasingly challenging market, rising labor costs and tough economic conditions to have led to a fall in profits and revenue growth.

"Optimism on growth has fallen, with 71 per cent of respondents hopeful about their prospects in China this year, down from 76 per cent last year."​

And whilst Cucino adds that with growth numbers dropping from 36 per cent to 22 per cent, the proportion of EU companies still reported obvious revenue growth in China in 2012. "In spite of some challenges in weak market conditions, China remains a pillar for European companies' global revenue generation."​