‘Disappointed’ EU businesses urge prompt reform and opening of market in China

Chamber expresses unhappiness at delay of reforms promised in late 2013

PUBLISHED : Thursday, 01 September, 2016, 10:30am
UPDATED : Thursday, 01 September, 2016, 11:11pm

The European Union Chamber of Commerce in China has urged Beijing not to delay to deliver on promises it made years ago to create a level playing field for European businesses when their Chinese rivals have few limits on their investment in EU markets.

The business lobby group expressed, once again, its disappointment about stalled reforms that were announced in November 2012, in the European Business in China Position Paper for 2016/2017, an annual report of 400 pages which gives a detailed review of 25 sectors where EU business has a presence.

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It is not the first time foreign business associations have criticised the slower-than-expected process of reforming unproductive state firms and widening market access, or voiced concern about an increasingly hostile business environment and rising protectionism alongside sluggish growth in China.

“Unfortunately, the reform agenda still often appears to be confused, uncoordinated and subject to intense resistance from special interest groups and local governments,” the report said.

It surmised the situation could be explained by the Beijing’s current focus on non-economic factors.

“It is clear that during the three years that followed the 18th Party Congress that took place in November 2012, Party and military reform were top priorities,” the paper stated.

While applauding China’s progress in fighting corruption, the chamber said the economy should be made the nation’s top priority.

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“In short, the decision [on economic reform] has yet to deliver on its promises, for European and private Chinese business alike. As it initially raised expectations quite significantly, this failure to follow through has contributed to rising level of pessimism.

“Waiting until after the 19th Party Congress in late 2017 to address problems and seize opportunities does not constitute a plan.”

Beijing is also swaying between reform and ensuring growth as its momentum continues to lose steam. The personnel reshuffle of the party’s elite group has weighed on the country’s political-economic life, observers said.

Ties between Beijing and Brussels were challenged recently by a dispute on rising exports of cheap Chinese products in overcapacity sectors in EU markets. EU members said the flood of Chinese products threatened local production and put local employment at risk. The bloc also launched anti-dumping investigations and imposed high punitive tariffs on Chinese exports, especially on industrial products.

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Beijing is unhappy with the EU connecting China’s overcapacity to a decision on whether and how to recognise China as a market economy, a status which is largely shrugged off by many economists in China but would be deemed a political triumph for Beijing.

In the report, the EU chamber also called for “reciprocity” in bilateral investment between EU and Chinese companies.

“It is an increasingly serious concern that reciprocal market access has yet to be fully extended to European business in China,” the report, adding that Chinese companies experience few limitations on buyingEuropean companies.

It also noted that 70 per cent of the Chinese investment that flew into Europe last year came from state-owned enterprises. Many of those investments were in advanced manufacturing and clean technology, which are priorities of China’s 13th five-year plan.

“It is therefore valid to question whether measures will be taken to close off participation by European business in China’s domestic market once their new technologies have been acquired by Chinese investors.”

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The chamber said in the report that it strongly supports that a China-EU comprehensive agreement on investment, currently under discussion, include “an ambitious market-opening component within all industry sectors” to create a more transparent and stable regulatory environment for European business.

The two sides started talks on the bilateral investment pact in 2013, later than a similar treaty negotiation between China and United States. The China-US talks have been prolonged due to US dissatisfaction about too many proposed market restrictions in China.