On the eve of the EU-China summit, the director-general of BusinessEurope, Markus J. Beyrer, tells EURACTIV that Beijing needs to move on market access “because European companies are less willing to invest if you don’t tick that box”.
Do you expect anything important to come out of this week’s EU-China summit?
There is a lot of interest on both sides. There is a lot of interest from companies in the European side, but also from the Chinese side. We have top CEOs from both sides, we have political representation from the highest levels on both sides, with the Chinese prime minister and [European Commission President] Jean-Claude Juncker. There is a lot of commitment, so we expect a lot.
We are now trading €1 billion a day, so as a trade relationship, this is very important. Where we could make progress, of course, is in services and investment.
This is linked to the improvement of the situation in the West, but negotiations have stalled for the time being, due to a difference in view.
For both partners, one issue is investment protection, but for us, it very much hinges on market access. Our market is already pretty accessible, including for investments, and what we need is improved access to the Chinese market.
The Chinese economy is very important, but they are now in a transformation phase. China is a very large economy now, which means that they have a higher degree of responsibility for a number of things.
Many companies are concerned about the end of double-digit growth rates. They are still very consistent, but not so good compared to where we have been. The Chinese call this the “new normal”.
The new Chinese government has reacted with monetary policy and other tools to maintain growth very high whenever there has been a slight slow-down. This is a healthy situation: transforming and making structural reforms to go in the direction of the “new normal”.
Another healthy development is the rebalancing of the economy from one that is purely export-based to one that is partly driven by domestic demands.
At the same time comes the real issue: Are they able to carry out all the structural reforms and make all the changes that are needed to support this process?
We have seen a lot of positive changes, but there are still a lot of things that need to be done. With this “new normal”, companies think differently about the amount of investment they should continue to make in China.
Criticism has always been there, but as long as there have been double-digit growth rates, people were more flexible. But now with a slowed growth, we expect them to do more on the other fronts we would expect from a reliable investment destination. This is a long list.
Market access is one thing. Another is the obligation transfer of technology. We are very happy to transfer technology, but this should be based on a commercial logic, not on a legal dictate.
Then of course there is the role of state-owned enterprises. This needs to be rebalanced over time, when you achieve this economic transformation. Discrimination in public procurement markets, intellectual property rights, etc. And we see positive elements. We have the Shanghai free-trade zone, which is very positive, we have this specialised intellectual property court, so there is progress. But of course there is still a long list of things that need to be tackled.
You say the bilateral investment treaty negotiations have stalled, but this is not what the Chinese ambassador said. She said that progress had been made, several problems had been solved, and that the talks would be accelerated in order to make real progress by the end of the year. Is this linked to the Juncker Plan?
I hope that what she says is right. Of course there is progress. We both want to protect our investments, and for us this clearly involves ISDS.
In return, we want market access, and for the time being I’m not sure that we can make much progress here: the declaration of non-discrimination, joint-venture necessity, the obligation to transfer technology, transparency, the list goes on. If we can advance on these issues I would hope that we could make progress rapidly, because we both need it. But it is asymmetric, because we both want to protect our investments, but the access to our markets is already in place.
In terms of market access, do you think that compared to a few years ago, there is some kind of change? And can that be an element for comparison for the future? How much have we advanced in the last three years, since we started thinking about a bilateral trade agreement?
It is clear that we have made progress. But on the fundamentals this is far from good enough. The issues I listed are all still there. Our recent assessment and the assessment of our friends at the EU Chamber of Commerce in China is clear.
According to the latest survey, 56% of European companies active in China say they would expand their business there, which is down from 86% two years ago—30% less.
Only 58% consider China among the top investment destination of the future. This is compared to 76% two years ago. So you can see clear, significant change.
Also, 55% of European companies still (believe) that they are being discriminated against by Chinese companies. 85% of companies say they support the anti-corruption campaign, and say that the new government is doing the right thing. But of course it is always a question of whether the glass is half full or half empty. I think there clearly has been progress, but to really make it count for a business’ bottom line, there is still a lot of work to be done.
They need to do more to attract investment, because companies are less willing to invest if you don’t tick the box of the market access.
Which sectors are you thinking of?
One example of a backward step is in the banking sector. The ICT requirement legislation, which has now been suspended, was a clear example of favouritism for Chinese companies. So there is progress, but the mindset has to change further in order to make this a success.
Do you think that Chinese companies will play a role in the Juncker Plan, particularly in the ICT sector, even without a bilateral agreement in place?
I think some Chinese companies will pledge large sums of money, and we are very open to their involvement. One of our newest partners is Huawei. They are the first Chinese member of our advice and support group. As (long )as they invest in Europe, we are in favour of this.