European companies operating in China delivered strong financial results last year, with 66 percent of such companies reporting higher sales in 2017 than 2016, according to a report released on Wednesday.
Among them, companies in the medical devices, pharmaceuticals and automotive sectors saw particularly robust sales.
The European Union Chamber of Commerce in China, in cooperation with German consulting company Roland Berger, released its annual Business Confidence Survey 2018 in Beijing.
The survey showed that in 2017, European businesses reported their highest increase in revenue since 2013. Growth in consumer spending was one contributing factor, as many European businesses are still benefiting from their technological advantages in high-quality goods and services, thanks to surging demand from China's middle-income earners.
About 61 percent of respondents reported for the first time that domestic firms are already equally or more innovative compared to their European counterparts. The report said the trend is driven by the country's growing spending on research and development, especially in high-tech acquisitions in overseas markets.
Mats Harborn, president of EUCCC, said: "Chinese firms are clearly becoming stronger and more competitive. It is time for China to remove the training wheels to create a sustainable economy for the long term."
"An increasing number of European companies are observing a level of innovation in China comparable to Europe or America," said Denis Depoux, CEO of Roland Berger China.
"This can bring disruption to European businesses, but it is also a sign that the time has come to leverage the strength of research and development in China, and the business ingenuity of Chinese entrepreneurs, either to develop new applications, or to test them on an innovation-thirsty Chinese market."
The survey said a well-negotiated European Union-China Comprehensive Agreement on Investment would send a clear message that China is committed to creating a positive business environment for all, and would help give European investors the confidence to expand their operations.
About 57 percent of respondents said they would likely increase their investments in China, if the country continues to offer more market access to foreign firms.
Asked whether the current trade tensions between China and the United States would have favorable implications, Depoux said these trade tensions have a negative effect on the whole economy, as they will create uncertainty, reduce trade flows, and disrupt well-established and efficient supply chains.
In many sectors targeted by tariffs, such as semiconductors, he said non-European companies, including those from Japan or South Korea, will yield higher benefits. This will only reinforce the determination of the Chinese government and companies to become more independent from global supply chains, he said.