After several years of progressive deterioration in sentiment, the first signs are emerging that business confidence in China may finally be stabilizing. The Business Confidence Survey (BCS) 2026 in fact outlines a significantly less pessimistic picture compared to that of a year ago, when many indicators were at historic lows.
For the first time since China abandoned its zero-Covid policy, the pace of deterioration has eased across several key indicators. Fewer European companies reported that the operating environment had become more challenging over the past twelve months. Furthermore, according to the survey, for the first time in the last five years, less than half of respondents believe that the business environment has become more politicized.
These are not yet signs of a real recovery. However, they could indicate that trust has reached its lowest point and that there is room for significant improvement, provided the right measures are taken.
In an increasingly uncertain world, stability represents China’s greatest opportunity.
Over the past year, businesses have had to operate in a much more unpredictable global environment. In such a scenario, one advantage prevails over all others: the ability to offer a stable and predictable market.
China has not yet fully achieved this goal, but it has strengths that many economies envy.
Firstly, the country continues to have no equal in terms of manufacturing efficiency and supply chain capacity. Three-quarters of businesses surveyed believe their operations in China are more efficient than those conducted elsewhere in the world, while 94% consider China a key sourcing market.
Second, China has built a highly competitive innovation ecosystem. Almost half of those interviewed now consider Chinese companies in their sector to be more innovative than their European competitors: a notable change compared to a few years ago.
Third, China continues to be an important source of revenue for global businesses. For over a third of those interviewed, the Chinese market generates more than 15% of global turnover.
At a time when businesses are rethinking their investment strategies globally, these strengths offer China a solid foundation. The real question is whether the country will be able to build on this foundation.
Strong foundations require stronger reforms.
There are reasons for cautious optimism. The most recent programmatic documents, in particular the Fifteenth Five-Year Plan, attribute greater importance to sustainable and quality growth, rather than growth at any cost. The Plan also contains several encouraging commitments: fairer treatment for foreign-invested businesses, measures to combat excessive competition, initiatives to stimulate domestic consumption and a more balanced approach to trade.
At the same time, however, the Plan reinforces China’s strategy of greater self-sufficiency. In practice, this orientation has often been supported by industrial policies that favor national companies in sectors considered strategic.
For many European companies the consequences have been clear. Localization requirements, sometimes extending down to individual components, and procurement practices that are not always equal have reduced market opportunities. Some companies have lost market share, while others have been forced to withdraw from certain segments.
This is precisely where the main challenge for Chinese policy makers lies: strengthening the country’s internal capabilities while maintaining its attractiveness to international investors. Finding this balance will be essential to rebuilding business confidence.
Shanghai’s international ambitions face reality.
Shanghai remains China’s main international hub. Most of those interviewed have established their headquarters there for the Chinese market or are considering moving there. Nearly half generate the majority of revenues generated in China in Shanghai and the Yangtze River Delta area.
The city’s strengths emerge above all on the innovation front. Respondents continue to give Shanghai very high ratings for human capital, intellectual property protection and the overall quality of the innovation ecosystem.
However, the survey also highlights a gap between ambitions and reality.
Nearly seven in 10 companies say cross-border capital transfers remain complex, raising questions about Shanghai’s ability to become a truly global financial center. Ordinary tasks, such as international payments or repatriating dividends, are even more complicated than they should be. Unlike other competing financial hubs, such as Hong Kong and Singapore, Shanghai has not yet managed to attract direct listings from international firms.
Trade also presents similar difficulties. Despite Shanghai being one of the world’s major logistics hubs, more than half of those surveyed continue to view cross-border business operations as complex. Export control measures and regulatory complexity are likely among the main causes.
Shanghai is arguably China’s most international city, but the survey suggests that work remains to be done before it can fully match the level of openness and accessibility of other major global economic centers.
Many of China’s economic challenges are structural in nature and will take years to address. At the same time, policymakers must balance domestic priorities with external pressures, including geopolitical tensions and a slowing global economy.
Not all reforms, however, need to be large or complex.
Alongside long-term interventions, China has the opportunity to rebuild trust through pragmatic, business-friendly measures that can produce immediate results. Many of these fall within the competence of local administrations and could be implemented relatively quickly.
Simplifying building permit procedures, improving access to finance – particularly for small and medium-sized enterprises –, removing obstacles to transferring businesses between different regions, strengthening protection for minority investors and institutionalizing regular, high-level dialogue between authorities and businesses could make a real difference.
Considered individually, these reforms may appear modest. Taken together, however, they could send a strong signal: China really intends to improve its business environment.
Business confidence is rarely rebuilt overnight. It is rebuilt through coherent actions and tangible progress. If China can demonstrate both of these qualities, current signs of stabilization could become the foundation for a broader recovery in confidence in the coming years.
By: Carlo Diego D’Andrea, national vice-president of the European Union Chamber of Commerce in China, managing partner of D’Andrea & Partners Legal Counsel
