European business' diplomat in Beijing

Joerg Wuttke, a German native and longtime China resident, discusses his host country's challenges while expressing confidence in the chinese economy

China's economic reform has advanced past crucial crossroads in some areas, but is not yet there in others, says Joerg Wuttke, president of the European Union Chamber of Commerce in China.

Wuttke says China's economy still can create sustained medium-levels of growth for many years to come. But that is contingent on sustainable drivers of growth - based on services, innovation and increased value-added output. These drivers, ultimately, can only come from business, he says.

China needs to create the conditions enabling them to fully play out - in short, a properly functioning, freer market economy, Wuttke says.

Since decisive economic reforms were outlined during the Third Plenum of the 18th Central Committee of Communist Party of China in 2013, China's economic reforms have been in the spotlight.

Wuttke says that China's reforms are more advanced in the financial sector and also in fiscal areas, where the government has worked to resolve local debt and financing issues. But in other areas, such as reforms of state-owned enterprises and the insurance sector, he doesn't see much happening.

Wuttke says that even the China (Shanghai) Pilot Free Trade Zone, established in 2013, "has just gone beyond the crossroads by five centimeters". Wuttke spoke with China Daily during the chamber's annual conference on Dec 16, which focused on reforms.

Three new zones, in South China's Guangdong province, East China's Fujian province and North China's Tianjin municipality, are set to start in March. "So maybe this kind of adding more free trade zones gives more momentum, but still it is slow," he says.

Wuttke, who was president of the chamber from 2007 to 2010, became the group's leader again in April. He says the number of European companies had grown from 1,200 members in 2010 to its current total of 1,800.

Wuttke says that a chamber survey shows that about 50 percent of members are very confident about the Chinese market despite slower growth. Still, he says, it is difficult to say whether the survey's results are positive or not.

"I think all of us are aware that the kind of steep increase of business opportunities is not going to happen, and China is going to change. So I think we all have to learn again about China being a cyclical story, not a straight line."

With a slowing economy, he says, it is reasonable that companies might not make new hires, might reexamine investments, and try to stabilize operations while examining other options.

"That is what you can see is, especially with Chinese enterprises. They see the margins are better in the US or in other parts, so there is an incredible outflow of Chinese investment," he says.

"There will be less investment coming into China for some period of time, until the overcapacity is gone, until the market has become more balanced, but nobody doubts the medium- to long-term potential of Chinese growth."

He says that free trade zones are just testing grounds, but the real catalyst for bilateral business will be the China-EU bilateral investment treaty, which is still under negotiation.

"European business is more keen to develop in the whole of China, not just two or three testing grounds. So the investment treaty will be the most crucial now," he says.

Many of the agreement's details will boil down to market access in all areas such as finance, insurance, and pharmaceuticals, he says. The chamber, he says, is making suggestions in key areas.

Chinese companies also should pinpoint where there are obstacles. He says he was very happy to see, at least in Berlin, that when President Xi Jinping visited in March, a new Chinese chamber of commerce had arisen there.

"I think that is great. Business has to find its own voice, and I hope one day maybe Chinese business in Europe will find its own voice," he says.

He adds that there are also new opportunities in China in some areas. There will be a big push into some energy sectors. Healthcare, especially for the aging, will grow. He says Europe wants to provide services as well as selling products.

Technology transfers also are an important part of the China-EU relationship.

He says as much as 40 percent of the technology China has brought from overseas has come from Europe, and Europeans also gain from the growth of the market. However, he notes that intellectual property rights is still a big concern for companies.

"I think Europeans are happy to contribute if they are safe, and they could be rewarded with the right fees."

While China is moving to greater reliance on the services sector, it's also a sector that is still underrepresented.

"If China needs good lawyers, needs good auditors, needs good service to bring the country to the next level, are they engaging foreigners? We hope so," he says.

Wuttke says he has worked in China for at least 17 of the past 20 years, and he now finds it very easy to maneuver in the country.

"The funny thing I experienced myself is that when you are far from the home country, so far away like myself for so long, which is more than 20 years, you idealize your home country. You think like, 'Oh it is so difficult here and Germany is much easier,'" he says. "Once you actually conduct business in Germany, you also realize how easy China is."

He says this came to mind when his mother died and he needed to renovate her home in Germany. In China, he says, it is easy to complain about the quality of construction craftsmanship, but in Germany, it took him four months to get a craftsman to show up.

"So I think once you are familiar with the flexibility the Chinese have, you actually really appreciate this. I think both systems have their charms," he says.

Foreign companies in China such as Qualcomm, Microsoft, Audi and BMW were investigated in 2014 by China's antitrust authorities. The chamber voiced concern that foreign companies were being targeted disproportionately, while Chinese officials say only 10 percent of companies that have been investigated were foreign.

Wuttke says in November, he led a chamber group that met with officials from the National Development and Reform Commission, which is in charge of the investigations.

"We were very grateful that they actually reached out to us, so we could talk about why we spoke up, and we could understand why they were not happy about us saying foreigners were forced or being targeted," he says.

It was a great meeting, he says, since both sides agreed to more transparency so they could better judge the situation. "The problem was we didn't know about the hundreds of cases - there were no websites, no explanation."

chenyingqun@chinadaily.com.cn

(China Daily European Weekly 01/02/2015 page32)