The mainland has been accused by a top European trade body of closing the door on economic reforms, raising trade barriers and squeezing foreign players out of domestic markets. The European Union Chamber of Commerce in China yesterday said the mainland was slowing down or even reversing on economic reforms and called for a more transparent and fairer business environment. The chamber pointed to Beijing's blocking of the Coca-Cola-China Huiyuan Juice Group merger as well as a range of technical rules and certification regulations being placed on foreign firms as anecdotal evidence for its criticisms. Beijing was increasing foreign investment restrictions, intervening in the market through industrial policies and limiting market access. 'The reform drive has to be restarted,' said chamber president Joerg Wuttke. 'This is an ideal moment for China to adopt a bolder cycle of reforms, a move that would ensure that it maximises its growth potential over the next five to 10 years.' Premier Wen Jiabao pledged in June to German Chancellor Angela Merkel that the mainland would create a level playing field for foreign companies and would not take any measures to discriminate against overseas companies and their products. Wen also vowed to work closely with the United States in stamping out protectionism in trade and investments and solving the global financial crisis. That resolve is now being questioned by the Europeans. Wuttke said one European supplier of encryption solutions for mainland banks and telecommunications companies had been forced out of the market after Beijing imposed a requirement for government certification and failed to approve any foreign suppliers. In the vehicle sector he said that while Chinese firms were free to buy any carmaker in Europe, companies in Europe setting up manufacturing facilities on the mainland had to enter into a 50-50 joint venture. He added that the collapse of the merger between Coca-Cola and Huiyuan raised suspicions of protectionism despite the Ministry of Commerce's claim it violated the country's new competition law. The EU is China's largest trading partner, with mainland exports accounting for 7 per cent of mainland gross domestic product and EU exports to China at 0.7 per cent of the union's GDP last year. Stuart Harbinson, a senior trade policy adviser with law firm Winston & Strawn and a former adviser to the World Trade Organisation, said finger pointing over alleged trade protectionism had been aggravated by the global financial crisis. 'Protectionism is fairly widespread after the financial crisis but China has been targeted much more and has shown quite a lot of restraint and patience,' Harbinson said yesterday. 'The fear is that countries may take a tit-for-tat measure where one country initiates measures against another, the other reacts and the whole thing escalates.' WTO director-general Pascal Lamy said last month that there was no indication yet of governments unwinding or removing trade-restricting or distorting measures they imposed early on in the crisis. Yi Xianrong, a researcher at the Chinese Academy of Social Sciences, a central government think tank, said the EU should offer solutions rather than just criticising China. 'European countries, which have far more advanced economies, should not criticise but should help China's developing economy,' he said. Yi said the mainland's economic reform was proceeding and the market was increasingly transparent. At a crossroads Some of the grievances contained in the European Union Chamber of Commerce in China's position paper Mainland car firms can buy EU carmakers, but foreign companies must still enter 50-50 joint ventures Rules requiring clients to use government-certified suppliers stifle business Foreign operators of computer reservation systems for travel agencies and airlines are still barred Foreign firms are shut out of the burgeoning market for outbound tourism Transparency The time granted for public consultation on proposed regulations was lengthened to 24 days in 2008 from 21 days in 2007, but is still too short The Ministry of Commerce did not provide enough evidence to explain why it rejected Coca-Cola's bid for local juice maker Huiyuan Beijing holds foreign firms to higher standards in implementing environmental protection and labour laws Intellectual property rights Confidential information required by laboratories goes beyond what is needed for certification and is often leaked to competitors Concerns about information leakage also make European businesses less likely to carry out research and development on the mainland Source: European Union Chamber of Commerce in China
