EU Chamber: China market barriers grow for EU business

A decade after its World Trade Organisation accession, China has increased some discriminatory policies on foreign businesses, a European business lobby said on Thursday, casting doubt on official pledges to level the playing field.

European businesses, in their growing reliance on China's booming economy, had stronger revenue and profit results from their China operations, the European Union Chamber of Commerce in China said in its annual position paper.

But increasing restrictions in some industries were putting European businesses at a disadvantage and hampering China's economic transformation, the paper said.

There remains a prevalence of long-standing market access barriers, laws and regulations that unambiguously discriminate against foreign companies, as well as the biased and subjective implementation of laws and regulations, it said.

Much like the first five years of China's accession to the World Trade Organisation, a second round of internal domestic reforms could once again serve as a sustainable force to drive China in the coming five, 10 and 15 years.

The EU Chamber sought to hold Chinese leaders to their promises to treat foreign companies equally, citing a 2010 speech in which China's Premier Wen Jiabao said all enterprises registered in China would be treated as Chinese.

A lack of progress in removing existing barriers and recent measures to further constrict market openness raise questions about stated intentions to create lasting opportunities for all market actors to compete on an equal footing, the group said in a statement issued with the paper.

The paper highlights over-reliance on fixed-asset investment and exports, slow service industry development, and dwindling labour supplies as risks to China's economy.

Achievement of new drivers [for China's economy] can be done only through efficiency, innovation, the development of the private sector ... and of course a big-scale investment by foreign invested enterprises, EU Chamber President Davide Cucino said. We believe we are running out of time.

The EU Chamber's findings echo calls made by its member survey released earlier in the year. That report said foreign companies bidding for public projects in China, valued at $1 trillion per year, face favouritism and corruption in the awarding of contracts.

Cucino told Reuters following a news conference launching the paper that market access was still the main issue facing European businesses.

INDUSTRY BARRIERS

The EU Chamber represents 1,600 businesses, many from the 27-member EU bloc that is now China's largest trading partner. Bilateral trade was worth nearly 400 billion euros ($573 billion) in 2010.

But the EU's trade deficit with China reached 168.8 billion euros that year, a gap that has prompted EU anti-dumping actions that have angered Beijing, and fuelled EU complaints over China's unfair barriers against European goods and services.

A Chinese Foreign Ministry spokesman said at a regular press briefing on Thursday that China upheld the principles of free trade and would continue to implement reforms.

Following the continuing opening up of the Chinese economy, there will necessarily be more space for overseas investors ... China will unswervingly continue to improve the investment environment, that is very clear, spokesman Liu Weimin said.

The paper also highlights what it calls discriminatory practices in a slew of sectors, including renewable energy, construction and the automotive industry.

Foreign companies were limited to a maximum 50 percent stake in automotive joint ventures for new energy vehicles and only domestic or joint venture firms with at least a 50 percent Chinese stake could develop offshore wind farms, it said.

In the construction industry, companies struggle to become licensed without a portfolio of previous projects.

We have these strange chicken-and-egg situations in the construction sector, in which to get a license you need to get references in China. You need to invest a lot of money. But without a license, you cannot get references, Cucino said.

He said the detailed list of encouraged technology investment was an indication that China still had the intention to transfer foreign technology to its homegrown enterprises.

Companies are investing in certain markets because they want to contribute to the growth of the market, but at the same time to obtain fair treatment. There is no contradiction between requesting more profit with the request of having equal treatment, Cucino said.