Headwinds blow European companies off track

A young woman walks past a poster for Philips products in Shantou, Guangdong province. [Zheng Wenjia For China Daily]

Other major EU companies, such as Philips NV, the multinational group based in The Netherlands that focuses on electronics, healthcare and lighting sectors, are also feeling the pinch.

"China is our second biggest lighting market and it remains very challenging, fueled by the macroeconomic slowdown, tight liquidity and a very weak construction market," Frans van Houten, CEO of Philips told analysts last month.

"Going forward, we need to be much more modest on expectations with regard to China growth - that is just being realistic," he said.

But the economic "headwinds" have affected companies in different ways. Last year, Nokia Corp's mobile phone factory, a seven-story glass and steel building in Beijing's Yizhuang high-tech industrial park, was closed.

Nokia's new owner, Microsoft Corp, the Internet giant based in the United States, then shifted investment to Vietnam to bring down costs.

While surging salaries have hit manufacturers, it is not the only reason why European companies are starting to reassess their China plans.

Many are concerned that favorable government measures toward domestic companies and price-cutting have squeezed their profit margins.

"In China, headwinds related to the government's anti-corruption measures, and efforts to favor domestic innovation, centralized tendering, and price erosion, will continue to impact the Chinese healthcare market in 2015," Ron Wirahadiraksa, chief financial officer of Philips, said.

"It is, therefore, expected to limit the growth of the Chinese healthcare market to low single-digits, with little change expected in the second half of this year."

Adam Dunnett, secretary general of the EU Chamber of Commerce, has called for more market access to stem the tide of falling "investment".