EU firms hope China will make good on pledges to open market – report

China's Premier Li Keqiang, Commission President Jean-Claude Juncker (R) and European Council President Donald Tusk attend a signing ceremony at a China-EU summit in Beijing in 2016. [Reuters]

A top European business lobby said on Tuesday (19 September) that EU companies were suffering from “promise fatigue” caused by China’s failure to follow through on pledges to open its market.

The EU Chamber of Commerce in China issued an annual 400-page report detailing the regulatory barriers that continue to hinder investment in the world’s second-largest
economy.

European businesses are “suffering from accumulated ‘promise fatigue’, having witnessed a litany of assurances over recent years that never quite materialised”, the position paper said.

The chamber urged China’s ruling Communist Party to “supplant words with concrete actions and provide reciprocal access to its market”, voicing hope that the new leadership to emerge from China’s Communist Party meeting will indeed show a commitment to market opening.

China’s ruling elite will hold a once-every-five-years congress starting on 18 October, where the Politburo Standing Committee, the apex of power in Chinese politics, will be fitted with a new line-up of leaders under President Xi Jinping.

Foreign businesses in China, long critical of what they see as Beijing’s failure to meet pledges to open its market, are eager for Xi to match the anti-protectionism messages he has been delivering to the world with reforms at home.

“We hope that the new line-up after the 19th Party Congress will show that there are people in place that are committed to further opening up,” European Union Chamber of Commerce in China President Mats Harborn said.

The restrictions imposed on foreign investments force companies from abroad to partner with local firms and often share vital technology – if they are not barred altogether from accessing a certain market, the chamber said. Chinese firms face no such restrictions in EU markets,” Harborn told reporters prior to the report’s release but added:

“If you ask our member companies… they are not very optimistic that these changes will happen”.

Better EU-China relations limited by persistent doubts on both sides, says report

The EU and China, the world’s second and third largest economies, should be looking to turn their trade relations into a genuine partnership but both are still wary of protectionism and unfair competition, according to a comprehensive report published on Wednesday (13 September).

A long list of snags hinders progress

While noting progress in some industries, such as pharmaceuticals, Harborn said Beijing should abolish its myriad foreign investment catalogues and lists of restricted industries for foreign investors, and “let one company law rule the activities of companies in China”.

The chamber urged the Chinese government not to rely on catalogues and financial incentives in designated investment zones but to focus on creating a predictable and transparent business environment based on the rule of law.

China says that it is an ideal country for foreign investments and that foreign companies have benefited greatly from decades of growth in its huge market.

But in recent years, Beijing has sought to address slowing growth by promoting innovation in strategic industries, such as information technology and robotics, plans that have riled foreign companies and their governments with their extensive “buy China” requirements.

In recent weeks, Chinese customs officials barred the import of certain mould-ripened cheeses containing cultures traditionally used in Europe, including Camembert, Brie and Roquefort.

The sudden move came with little explanation, taking effect even though new national food safety standards for cheese more than two years in development had not yet been announced.

“It’s very surprising, and we can’t understand the rationale behind it,”  Harborn said.

New Chinese rules to begin on 1 October that require inspection certificates even for certain low-risk food products were “out of line with international practice”, the EU Chamber report stated, and could potentially dramatically reduce agriculture, food and beverage imports.

Harborn also expressed concern over China’s strict new cyber security law, which since its implementation on 1 June has required that tech companies store user data inside the country, among other things.

Without greater transparency on China’s part, the vaguely worded legislation would likely further bar fair competition and undermine trust, he said.

Business groups have warned that China risks a protectionist backlash from Europe and the United States if it doesn’t open up major sectors, such as financial services, healthcare and logistics, in which foreign firms often face far greater restrictions than their Chinese competitors do abroad.

Germany, France and Italy welcomed the European Commission’s proposal last week on vetting non-EU investments, having pushed for tighter oversight of foreign acquisitions of sensitive European technology following a rise in such deals by Chinese players.

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