Economy

Markets

Industries

Insights

Reports

Events

Euro firms' China woes highlighted

By Ding Qingfen (China Daily)
Updated: 2009-09-03 07:43

Officials and experts have disputed claims from the European Chamber of Commerce in China that say China's "protectionist measures" and lagging economic reforms have stifled the business environment for overseas firms.

Despite China's ongoing economic reforms, European enterprises doing business in the country are feeling the "increasing threat of protectionism" coming from the Chinese government, according to the European Business in China Position Paper 2009, which was released by the chamber yesterday.

The paper claimed European companies were losing out because of China's "market access intervention and investment restrictions".

It called upon China to make amends by building a "predictable, transparent and fair business environment for all", adding that such actions would "strengthen confidence from the European companies and also boost domestic consumption".

The report was the latest in a series of nine annual position papers released by the European chamber based upon surveys of the organization's 1,400 member companies.

Many of the themes have been explored in past years and Chinese commentators noted that, despite the criticism, European companies were still flocking to do business in China.

Joerg Wuttke, president of the European Chamber of Commerce in China, said things had deteriorated recently. "Over the past year, we have noted a gradual slowdown, and in some cases, a partial reversal, in the economic opening-up process," he said.

But the Ministry of Commerce (MOFCOM) took issue with the claim, arguing that "China has been making efforts to create a sound and fair environment for foreign businesses". But the ministry said it "welcomes and attaches importance to suggestions from all sides".

Li Jian, a researcher from the International Trade and Economic Cooperative Research Institute under the ministry, said China had made great strides.

"Eight years have passed since China entered the World Trade Organization and nobody can deny the achievements," Li said. "We cannot expect everything to be different overnight. It's just a matter of time."

The United Nations Conference on Trade and Development released a report on July 22 that said China was still the most attractive destination for foreign direct investment, thanks to its economic dynamism and stability.

Since late last year, China has been the major target of trade protectionists from countries including the US and organizations including the EU.

Since late July, the 27-nation EU has launched five anti-dumping investigations and China has warned the group to refrain from using unreasonable measures against it.

After briefly mentioning China's progress in rolling out new laws, including the Food Safety Law, and in lifting bans within the financial, IT and tourism sectors, the position paper emphasized problems facing European businesses.

The paper emphasized challenges in three areas: market access, transparency of legislation and Intellectual Property Rights (IPR).

It said European auto makers faced several barriers. "To operate in China, they are still forced to establish 50/50 joint ventures, just as they were 30 years ago when China implemented the reform and opening-up policy," said Wuttke.

Related readings:  Ambassador to EU urges restraint of anti-dumping  Hoarding energy-guzzling bulbs ahead of EU ban  Ministry: China's trade surplus with EU to ease from last year  China to extend anti-dumping measures on catechol from EU

But Li Xiaogang, director of the Foreign Investment & Research Center with the Shanghai Academy of Social Sciences, said China was taking action.

"Actually, China made quite a concession when it allowed foreign auto companies to join in decades ago, but anyway, the time is ripe for the Chinese government to consider making changes," Li said.

He added that the nature of any future amendments depend on the position taken by the EU on some key issues, such as "whether and when to acknowledge China's market economy status (MES)".

The EU, the US and Japan are still refusing to acknowledge China has MES status, which led to them launching protectionist measures.

"If the EU agrees to make some concessions, China would probably love to do likewise," Li said.

The other big criticism in the paper, the lack of transparency in legislation and implementation, was the major obstacle facing European businesses in China, the paper claimed.

Citing the case of Coca Cola's plan to acquire Huiyuan, China's largest fruit juice maker, which was blocked by the Chinese government, the paper noted there was "not enough explanation and analysis for important decisions and key cases".

China turned down the deal in March, saying it violated the Anti-Monopoly Law and would give Coca Cola a dominant market position. It was the first rejection under the legislation.