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Most European businesses are doing well in China despite increasing competition, says the latest survey of the European Union Chamber of Commerce in China.

The annual European Chamber business confidence survey, released yesterday, also found that China's biggest attraction is its domestic market rather than its relatively low labor and sourcing costs.

In fact, over 80 percent of the respondents to the survey said they were in China primarily to access or serve the Chinese market.

"EU companies are doing well in an increasingly competitive business environment. In comparison to last year's survey, there is a stronger focus both on establishing R&D facilities and also on expanding investment," European Chamber President Joerg Wuttke said.

Conducted jointly with international consulting firm Roland Berger Strategy Consultants, the survey is based on interviews with about 200 European companies.

The respondents were willing to invest in China's research and development (R&D) centers, too. Thirty-one percent of the surveyed companies with more than 100 employees have already set up R&D centers in China, and 32 percent want to open or enlarge their R&D facilities in the next two years.

Apart from reducing R&D costs by employing local skills, another primary motive for their investment in R&D is to make their products suitable for Chinese customers. European businesses are generally optimistic about their business performance in China, according to the survey. Their optimism is based mostly on the continuing strength of the country's economic development and the resultant growth in domestic consumption.

But many of them are worried about issues such as shortage of qualified staff, environmental problems and insufficient protection of intellectual property rights.