Foreigners doing business in China feel boxed out: report

Foreign firms doing business in China say laws discriminate against them, an EU Chamber of Commerce Report said Tuesday, echoing complaints from other international competitors.

Foreign firms are being cut out of business opportunities by official discrimination in favor of Chinese companies, and there is no sign of the playing field being leveled in the near future, a major European business group complained on Tuesday.

The report on business confidence by the European Union Chamber of Commerce adds weight to a growing chorus of complaints by foreign businesspeople in recent months that the Chinese authorities are increasingly setting rules and standards designed to favor local manufacturers over international competitors.

Though the Chamber’s members almost all expect strong growth in the Chinese economy, only one-third of them expect their profits to be good.

That pessimism stems largely from the fact that “nearly 40 percent of our members say the situation in two years will be even less fair than today,” said Chamber President Jacques de Boisséson.

“Optimism in the overall economic climate has been dampened dramatically by concerns about regulatory interference and unpredictability in the market,” the report said.

China should not take the presence of European companies and their commitment to China for granted,” Mr. de Boisseson said, voicing members’ frustration. “They tell us that if things turn sour, China is not necessarily a must for them.”

Unwelcoming signs

In March, the American Chamber of Commerce in China also reported growing unease about doing business here, with 38 percent of US firms saying they felt unwelcome, up from 26 percent in 2009.

An international uproar last December forced the government back to the drawing board with its Indigenous Innovation Product Accreditation Program, seen as a bid to cut foreign companies out of the official procurement market. But the plan is still in the works “and we will have to see in practice how it works,” says one European diplomat warily.

Recent experience in such promising sectors as renewable energy is not encouraging. Foreign wind-turbine manufacturers in China have not won a single tender to build a wind farm here since 2005. They are handicapped, EU Chamber officials say, by requirements such as one demanding that bidders on projects have a minimum production capacity 30 percent higher than the largest currently operating foreign-owned maker of turbines. That condition makes a winning bid virtually impossible.

“There is nothing official to keep foreigners out of the market, but you just have to look at the results of the tenders to know what the policy is,” says the diplomat.

Promoting home-grown technology

China’s ambition to replace key foreign technology with home-grown or home-adapted versions within a decade has led it to place a host of restrictions on foreign firms, executives complain, ranging from mandatory technology transfers to local content requirements. And government efforts to boost local entrepreneurs over foreign competitors include uneven application of the law, they say.

EU firms surveyed complained, for example, that they have to comply with environmental regulations that their Chinese counterparts ignore with impunity. Forty-seven percent said they experience “strong” enforcement of such regulations; only 7 percent felt that Chinese firms were subjected to that level of implementation.

De Boisséson said he took heart from recent reassurances by Prime Minister Wen Jiabao, at a meeting with top European businessmen, that their investments were welcome and would be treated the same as Chinese companies.

“We look forward to the premier’s words being translated into deeds,” he said.

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