Members of the British Chamber of Commerce pose for a photo at the Sentiment Survey Launch in Guangzhou, Guangdong province, Jan. 22, 2024. [Photo/British Chamber of Commerce Guangdong]

British businesses in China reported increased optimism in 2023, driven by increased revenues, market openness and regulatory changes, according to a recent survey by the British Chamber of Commerce in China.

The British Business in China Sentiment Survey, encompassing over 300 British companies across various sizes and sectors, revealed the proportion of companies reporting optimism rose by 15 percentage points, from 31% in 2022 to 46% in 2023, closely mirroring the Chinese economy's gradual return to normalcy post-pandemic.

The retail sector reported the highest levels of optimism among British businesses, with 75% expressing high optimism, according to the survey. This aligns with recent data from China's National Bureau of Statistics that showed record retail sales in China of 47 trillion yuan ($6.53 trillion) in 2023. This trend is evidence that China's transition from an investment-driven to a consumption-driven economy is progressing, despite economic headwinds.

More broadly, 45% of British companies across all sectors anticipated increased revenues in 2023, further buoyed by China's GDP growth of 5.2% last year.

Other sectors like energy and healthcare also reported increased optimism, reflecting a positive response to changes in China's regulatory environment.

The State Council of China unveiled guidelines for attracting foreign investment in August last year, aiming to create a more favorable environment for foreign companies. These guidelines, focusing on a range of policies, including a level field for government procurement practices and R&D investment opportunities, were well received by British businesses, with 21% of survey respondents reporting a positive effect just months after their release.

In the energy sector, for example, there has been a significant reduction in the number of businesses facing market access difficulties, with a decrease from 66% to 40% compared to the previous year, marking a notable 26 percentage point improvement, according to the survey.

Meanwhile, Chinese industrial policy is attracting high levels of R&D investment from British businesses, including in technology and healthcare, with many companies encouraged by China's growth objectives in such sectors. One-quarter of healthcare companies told the chamber they were considering boosting R&D investment.

Elsewhere, 27% of British businesses reported seeing opportunities to reduce energy consumption and carbon emissions, in line with China's goals to peak carbon emissions before 2030 and become carbon neutral by 2060. In fact, 70% of British energy companies were positive about China's dual carbon goals, suggesting that there is plenty of room for foreign private engagement. 

Despite these encouraging developments, geopolitical tensions continue to impact relations between China and the West, fostering some business hesitancy. The survey revealed that 42% of companies felt constrained by unpredictable trade policies toward China in the past year. However, 2023 also saw positive signs for China-U.K. relations, highlighted by then-Foreign Secretary James Cleverly's visit to Beijing in August, signaling a renewed commitment to high-level engagement.

Trade between the U.K. and China has shown robust growth, with total trade in goods and services reaching 108.7 billion pounds ($137 billion) in the four quarters to the end of the second quarter of 2023, according to the British Department for Business and Trade. This marks an 8.4% year-on-year increase, solidifying China's position as the U.K.'s fourth largest trading partner, accounting for 6.5% of the country's exports and imports.

The optimism found in the survey was reflected in the wider international business community in China. Throughout 2023, the U.K., as well as Canada, France, Switzerland and the Netherlands, significantly increased their investments in China, said Wang Wentao, Chinese minister of commerce, at a press conference on Jan. 26. He also noted that the number of newly established foreign-funded enterprises in China from the European Union, the United States and Japan has seen growth.

Over the coming months, the British Chamber of Commerce will discuss their findings with government departments and businesses. In May, they then plan to release a position paper outlining specific challenges and recommendations to further improve the business climate for all organizations operating in China.