European companies are upbeat over growth opportunities in China, but wary of the deteriorating regulatory environment, according to a survey by the European Chamber of Commerce.

40 per cent of European firms expect a deterioration of the business environment in China to over the next two years amid fears that China is using backdoor protectionism to shut foreign businesses out of the market.

The survey, conducted in March and April this year, found that the number of EU companies making profits in China had fallen from more than 70% two years ago to less than 60% today, as they faced increasing local competition, rising wage costs and shrinking margins. Chief among the concerns was the selective enforcement of regulations where Chinese companies appeared to get an easier ride than foreign businesses, making it harder for EU businesses to compete.

“The Chinese authorities should not take the presence and commitment of European companies for granted,” said Jacques de Boisseson, president of the European Chamber in China. “This massive commitment to the Chinese market is not unconditional. If perceived risks materialise to a great extent, the presence and commitment of our members may disappear.” Such fears have been echoed in recent statements by the American Chamber of Commerce in Beijing.