83 per cent said Internet censorship impacts their ability to conduct business in the country, either negatively or somewhat negatively. STOCK IMAGE
Authorities have in recent months increased restrictions on virtual private networks (VPNs), used to circumvent China's vast censorship apparatus known as the Great Firewall which blocks websites such as YouTube and Facebook.
Access to Google's email service also became more difficult in December.
The European Union Chamber of Commerce in China said the restrictions amount to an "Internet tax", adding that 86 per cent of respondents to an internal survey said they had a "negative effect" on business, a 15 per cent increase compared to June.
"Restricted access to key Internet tools is not merely an unfortunate inconvenience for individuals -- it is an increasingly onerous cost of doing business here that many companies are finding harder to bear," said Jorg Wuttke, president of the chamber which has around 1,800 members.
"This is not just a problem for international business -- we know from extensive conversations with the Chinese public and the private sector that many domestic companies are just as frustrated."
Since Xi assumed power in 2012, free expression has been heavily curtailed and online censorship has sharply increased in order to maintain the ruling Communist Party's grip on power.
China has also shut down many tools that make it easier to communicate across borders as the government works to stem the inflow of foreign ideas and culture.
Of the companies surveyed by the lobby group, 80 per cent said the tightening Internet controls has become worse since the start of 2015.
Some 13 per cent of respondents said the recent increase in censorship means they have deferred or are unwilling to set up research and development centres in China -- which would be a blow to government plans to increase innovation.
Hua Chunying, a foreign ministry spokeswoman, said at a regularly scheduled news conference in Beijing that China "is open to foreign companies so long as they abide by China regulations".
Citing China's ranking as the top destination for foreign direct investment, Hua said "the investment environment must be good, with profits to be made, if foreign companies are willing to make such investments."
The report comes just one day after an American Chamber of Commerce in China survey found 57 per cent of respondents believed foreign firms are being singled out by Beijing's pricing, anti-monopoly, and anti-corruption campaigns.
Of American firms surveyed, 83 per cent said Internet censorship impacts their ability to conduct business in the country, either negatively or somewhat negatively.
Nearly half of US firms in China -- 47 per cent -- feel "less welcome" in the country than before, up from 44 percent last year, the survey said.
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