China: closed to business
April 7, 2010 by Jules
China WTO violations?
Very interesting open letter from Joerg Wuttke of the EU Chamber of Commerce in China, as it was published in the Financial Times this morning.
We reproduce it in full below, as an opinion piece.
We also encourage you to subscribe to the FT (they have a good value online subscription service) if you have an interest in China and India news: it has been for a few months the best informed international source we can suggest.
"In the 10 years since the establishment of the European Union Chamber of Commerce in China, I have seldom seen market sentiment among members so bleak or pessimistic. After 30 years of progressive market reforms, many foreign businesses in the country feel as though they have run up against an unexpected and impregnable blockade.
For more than 30 years, foreign companies have been welcomed into China. They have brought massive levels of investment and technical and management skills, building supply chains that benefit not only their own businesses but those of competitors, while also providing consumers with more choice. Their contributions continue to be an important driver of China’s economic success.
Suddenly political developments and regulatory restrictions have converged to create a dangerous cocktail that, for many companies, smacks of protectionism. While in some sectors – financial services and retail, for example – the doors to the Chinese market open ever wider, in many industries frustration among foreign businesses is far higher than Beijing realises.
For the first time I hear of companies contemplating leaving the country altogether. They consider this not because they cannot compete with local rivals – but because they are weary of slogging through an unpredictable business environment where the odds seem deliberately stacked against them.
I also hear of big companies preparing strategies to route part of their future investment away from China and into other Asian countries, where a more transparent and predictable market environment means safer and healthier investment opportunities.
With feelings so high, policymakers in Brussels and Washington are also rattling their sabres. There is a risk for China that governments of struggling western economies will increasingly take potshots at Beijing’s economic policies.
Foreign business is potentially an important ally for China, and the country risks alienating it just when it most needs friends abroad. Sentiment is turning sour at the very moment when foreign companies could be standing beside China in the fight against protectionism. Foreign businesses have a vested interest in keeping markets open and trade flowing. They should be beating down the doors in Brussels and Capitol Hill to advocate for free trade. Instead, they are asking why Chinese groups can freely access foreign markets when foreign companies are given less than equal treatment in China. They are asking why Geely can buy Volvo, while foreign motor manufacturers still have to form joint ventures to manufacture their cars in China.
The first step out of this situation is for Beijing to offer reassurance – through concrete, measurable actions – that it will adhere to the spirit of its World Trade Organisation commitments and provide a level playing field for all businesses in China. Take, for example, the “indigenous innovation” regulations proposed last year, which will require government procurement to favour products that are based on domestically developed intellectual property. Though we have been encouraged by official responses to our queries on this issue, we now need proof – through implementation – that these measures are not, as they are now perceived, a crude attempt to force foreign rivals out of certain markets.
The second step is sustained and meaningful dialogue. Premier Wen Jiabao recently identified a lack of communication as a key problem in relations between China’s leadership and international business, and pledged to meet more often with foreign companies. This is sorely needed.
Whether it recognises it or not, China has an image problem both among foreign businesses in the country and with political leaders in Europe and the US. It can change this perception, but not by persisting with ill-conceived and obstructionist policies – or by alienating natural allies.
The European Chamber recently offered more than 500 recommendations for improving the business climate in China. In November we offered proposals to tackle the widespread problem of industrial overcapacity. European business is a partner in China’s economic success – and its economic future. We are ready to discuss how we can best achieve our common goals. But this will only happen if we know that we are welcome at the table.
The writer is president of the European Union Chamber of Commerce in China."
In: Market News