EUROPEAN COMPANIES are upbeat about the broader outlook for China’s growth, and say the country has become a major part of their growth strategy. However much of this optimism is offset by fears about the future of the regulatory environment, a report by the European Union Chamber of Commerce has shown.

The chamber's Business Confidence Survey 2010surveyed more than 500 European companies based in China between March and April of 2010.

The results show a European business community that remains optimistic about rising economic growth, but concerned about uncertainty in the business environment and ongoing regulatory unpredictability.

Their top concerns have not changed for the past five years, and focus on discretionary enforcement of laws and regulations. Registration processes, issues surrounding intellectual property rights and inconsistencies in the local implementation of national standards continue to frustrate.

“Our members are confident about market growth in China, and are backing this up with strategies based on investment and market-share expansion,” said Jacques de Boisseson, president of the European Chamber.

“However, they are concerned about an unpredictable regulatory environment that constrains their ability to compete,”

Some highly public decisions, such as that to impose hefty jail sentences on four Rio Tinto executives for paying bribes and stealing secrets, caused a major stir in the Western business community.

Some 40 per cent of the survey’s respondents expect the regulatory environment to worsen for foreign-invested enterprises over the next two years, and a further 22 per cent anticipate there will be no improvement.

Only 10 per cent anticipate any improvement over the next two years.