Call for more grunt in reform drive

China needs to speed up the pace of its reforms to avoid a major economic setback, said Joerg Wuttke, president of the European Union Chamber of Commerce in China.

It is vital that the government implement decisive measures outlined at the Third Plenum last November, he said.

"China today stands at a crossroads," he said in Beijing on Sept 9 as the chamber published its European Business in China Position Paper for 2014-15.

"China has enough firepower to create sustained medium-levels of growth for many years to come if sustainable drivers of growth based around services, value-added, innovation and efficiency are fostered now."

EU companies greatly look forward to reforms announced after the plenum being implemented, he said. Among other things, the plenum called for the market to have a "decisive role" in economic affairs.

"The aim is right, but the implementation is too slow and too cautious," Wuttke said.

The chamber's paper is based on more than 800 recommendations it collected from its 1,800 member companies in China

It offers suggestions on various aspects of business, such as financial reform, including tax reform, market access, innovation, fair competition, environmental issues, quality of life and intellectual property rights.

The chamber voiced concern that foreign companies are being targeted disproportionately as China's antitrust authorities investigate several industries, including technology firms Qualcomm and Microsoft and the carmakers Audi, BMW and Mercedes-Benz.

However, Premier Li Keqiang said on Sept 9 that only 10 percent of companies that Chinese antitrust authorities had investigated recently were foreign.

The Ministry of Commerce said foreign direct investment fell 16.95 percent to $7.81 billion in July year-on-year, the lowest since July 2012.

Wuttke said the slowdown of European investment in China is partly because of overcapacity, rising costs, competition and difficulties in finding new revenue in the country, while profits in some of China's neighbors are growing. At present China is attracting little new investment, he said. However, if it can open up its market more and broaden reforms, he foresees as much as 23 billion euros ($29.7 billion) of investment pouring into the country in the foreseeable future.

Lu Jinyong, director of the China Research Center for Foreign Direct Investment, agrees that the implementation of decisions from the Third Plenum has been slow, but said Western companies need to be patient. Many of the reforms proposed need to be implemented over the long term, but some decisions have already taken effect, such as opening of the China (Shanghai) Pilot Free-Trade Zone, he said.

China's economic situation is changing and more local companies are becoming more competitive, he said, and Western companies are unlikely to be given the kind of preferential treatment they have enjoyed till now. They need to adapt their strategies for China, he said.

chenyingqun@chinadaily.com.cn

(China Daily European Weekly 09/12/2014 page3)