Is business confidence in China approaching an inflection point?
This article was originally published in Italian in Panorama on 16th July 2026.
Please note that this is a courtesy translation of the Italian language article originally published in the Panorama Magazine Issue at: https://www.panorama.it/attualita/economia/la-fiducia-delle-imprese-in-cina-sta-raggiungendo-un-punto-di-svolta
After several years of declining sentiment, there are early signs that business confidence in China may finally be stabilising. The Business Confidence Survey (BCS) 2026 paints a noticeably less pessimistic picture than a year ago, when many indicators were at or near record lows.
For the first time since China abandoned its zero-COVID policy, the pace of deterioration has slowed across several key measures. Fewer European companies reported that the business environment had become more difficult over the previous 12 months. For the first time in five years, fewer than half said the business environment had become more politicised.
These are not yet signs of a rebound. But they may suggest that confidence has reached its low point—and that meaningful improvements are possible if policymakers take the right steps.
In an uncertain world, stability is China’s biggest opportunity
Over the past year, businesses have had to navigate a far more unpredictable global environment. In such a climate, one advantage stands above all others: the ability to offer a stable and predictable market.
China is not fully there yet. But it has several strengths that many economies would envy.
First, China remains unmatched in manufacturing efficiency and supply chain capability.Three-quarters of survey respondents said their China operations are more efficient than those elsewhere in the world, while 94 per cent consider China an important sourcing market.
Second, China has built a highly competitive innovation ecosystem. Nearly half of respondents now view Chinese companies in their sector as more innovative than European competitors—a remarkable shift from just a few years ago.
Third, China continues to be a major source of revenue for global businesses. For more than a third of respondents, the Chinese market accounts for over 15 per cent of their global revenues.
At a time when businesses are reassessing global investment strategies, these strengths give China a valuable foundation. The question is whether it can build on them.
Strong foundations need stronger reforms
There are reasons for cautious optimism. Recent policy documents, especially the 15th Five-Year Plan, place greater emphasis on sustainable, high-quality growth rather than growth at any cost. The plan also includes several encouraging commitments, including fairer treatment for foreign-invested enterprises, measures to curb excessive competition, efforts to boost domestic consumption, and a more balanced approach to trade.
However, the plan also reinforces China's push for greater self-reliance. In practice, this agenda has often been supported by industrial policies that favour domestic firms in strategic sectors.
For many European companies, the consequences have been clear. Localisation requirements, sometimes extending down to individual components, and unequal procurement practices have reduced market opportunities. Some companies have lost market share, while others have been forced to withdraw from certain parts of the market altogether.
This highlights the central challenge facing policymakers. China wants to strengthen domestic capabilities while remaining attractive to international investors. Striking that balance will be critical to restoring confidence across industries.
Shanghai's International Ambitions Face a Reality Check
Shanghai remains China's leading international business hub. Most respondents either have their headquarters there or are considering relocating them to the city. Nearly half generate the majority of their China revenue in Shanghai and the wider Yangtze River Delta.
The city's strengths are particularly evident in innovation. Respondents consistently rate Shanghai highly for research talent, intellectual property protection and the overall quality of its innovation ecosystem.
Yet the survey also reveals a gap between ambition and reality.
Nearly seven in ten respondents say cross-border money transfers remain difficult, raising questions about Shanghai's goal of becoming a truly global financial centre. Routine activities such as international payments and repatriating dividends are still more complex than they should be. Unlike competing financial hubs such as Hong Kong and Singapore, Shanghai has yet to attract direct listings from international companies.
Trade presents similar challenges. Despite Shanghai's position as one of the world's leading logistics hubs, more than half of respondents still find cross-border trade difficult. Export control measures and regulatory complexity are likely contributing factors.
Shanghai may be China's most international city, but the survey suggests there is still work to do before it can fully match the openness and accessibility of other leading global business centres.
Building confidence with quick wins
Many of China's economic challenges are structural and will take years to address. Policymakers must also balance domestic priorities with external pressures, including geopolitical tensions and a slowing global economy.
But not every reform needs to be large or complicated.
Alongside longer-term changes, China has an opportunity to rebuild confidence through practical, business-friendly measures that deliver immediate results. Many of these fall within the authority of local governments and could be implemented relatively quickly.
Simplifying construction permit approvals, improving access to financing—particularly for small and medium-sized enterprises—removing barriers to relocating operations across regions, strengthening protections for minority investors, and institutionalising regular high-level government-business dialogues would all make a tangible difference.
Individually, these reforms may seem modest. Collectively, they could send a powerful signal that China is serious about improving its business environment.
Business confidence rarely returns overnight. It is rebuilt through consistent action and visible progress. If China can demonstrate both, today's signs of stabilisation could become the foundation for a broader recovery in confidence tomorrow.
Edited by: Carlo Diego D’Andrea, Managing Partner of D’Andrea & Partners Legal Counsel and National Vice President of the European Union Chamber of Commerce in China (EUCCC).
