Confidence with a caveat

European companies are making more money than ever, and are more confident, but some complain that they do not have a level playing field

European companies are in the money in China. Businesses from the EU are making ever-larger profits from their activities in the world's second-largest economy, according to a major new survey. The European Business in China Business Confidence Survey, produced by the European Chamber of Commerce (EUCCC) in China in partnership with strategy consultants Roland Berger, is seen as one of the major barometers of the mood of European companies operating in the country.

Business confidence is also high with 79 percent of respondents saying they were optimistic about growth in their sector.

Just as there are credits on the ledger of doing business in China, there were debits too, however.

As many as 43 percent of respondents felt favoritism was shown to homegrown corporations, compared to 33 percent in 2010.

Nearly half (46 percent) believed they would be facing an even more unfair playing field in future.

One of the key surprises, however, is a sudden increase in the profitability of European company activities in China.

In 2010, only 43 percent reported they were making more profits than a year before but this proportion has climbed this year by almost two-thirds.

Dirk Moens, secretary general of the European Chamber of Commerce in China (EUCCC), said the profits in China were now in some cases running ahead of those before the economic crisis.

Profits are picking up and we are seeing the numbers back to pre-crisis level and maybe a bit ahead of that," he says.

Charles-Edouard Boue, president Asia of Roland Berger Consultants, believes doing business in China has never been more profitable.

"In my many years in China, it's the first time that there is so much profitability. This is a good message. European companies feel that the country is very important market for their business. It's growing fast and with positive momentum and profit," he says.

Nearly three-quarters (74 percent) of the respondents in the current survey reported a net profit margin in 2010, compared to 58 percent in 2009 and a slightly higher 63 percent in 2008.

Bernhard Hartmann, managing director for Greater China for international management consultants AT Kearney, based in Shanghai, says one of the reasons is that profit is now a real driver for European and other foreign businesses in China.