Action not words needed on foreign access to China markets, says chamber

The European Union Chamber of Commerce in China has urged Beijing to act on its promises and take concrete steps to give fair market access to foreign firms operating on the mainland.

The measures were needed to avoid a backlash from China’s trade partners and to ensure that the mainland remained an attractive destination for foreign investment, the chamber said in an annual report.

Beijing’s has made repeated promises this year to reduce curbs on market access to foreign firms, but overseas companies continue to complain about the issue, with the amount of foreign direct investment in China declining.

The chamber listed the concerns of its member in 15 sectors, ranging from the food, car, health care, aviation and insurance industries. The worries included barriers to market access, economic protectionism and discriminatory treatment against foreign firms.

“It appears that in many areas China is no longer opening up, but selectively closing up,” the report said.

Foreign companies dissatisfied with China’s slow progress in opening up investment markets

The report also listed concerns about forced technology transfer in China – such as in new energy vehicle production – in exchange for market access.

“We’ve seen a lot of new regulations, but not implementation in the way we would expect”, Mats Harborn, the chamber’s president, told a briefing ahead of the report’s release. European firms are “suffering from accumulated ‘promise fatigue’, having witnessed a litany of assurances over recent years that never quite materialised,” the report added.

China attracted US$72 billion in foreign direct investment in the first seven months of this year, down 6.5 per cent from the same period a year ago. Foreign investment fell 15.8 per cent in July to US$6.5 billion compared with the same month in 2016, according to the data released by the Ministry of Commerce.

“While China remains a very important market for European businesses, with the US and other markets now presenting themselves as more attractive investment destinations than they were during the financial crisis, China needs to be more proactive in attracting FDI,” the report said.

China’s outbound investment is now targeting hi-tech assets to serve Beijing’s ambition to build up the nation’s technological prowess, but comes amid a reluctance to open up its own markets fully, according to critics.

European Commission President Jean-Claude Juncker said last week the EU would tighten up screening of foreign investment, especially if there were national security concerns. Analysts said the announcement was largely targeted at Chinese firms interested in European companies.

Harbon at the EU chamber in China said: “The lack of reciprocity in market access is not politically sustainable. We worry that if China is not moving from words to action, this could lead to a backlash against economic globalisation.

“We don’t want to see measures taken by different trade blocs which lead to tit-for-tat retaliation or policies to appease political resistance in different trade blocs.”

‘Made in China’ hi-tech plan risks pushing out foreign competitors, European businesses say

He also hoped for “more openness and transparency” from the Chinese authorities to explain policies and restrictions, particularly after Beijing imposed curbs on moving cash out of the country to defend against capital flight and to prop up the value of China’s currency.

“If it is not [done], it will lead to a lack of trust. And a lack of trust in capital flows is detrimental to attract foreign investment over the long term,” said Harborn.