European Companies in China to Stay Put Despite Obstacles

By | September 2, 2010

European companies are not quitting China for other countries despite complaints about the growing difficulty of doing business, the European Union Chamber of Commerce in China said on Thursday.

Jacques de Boisseson, the group’s president, said some of the chamber’s 1,400 members had thought about relocating because they were unable to compete equally with their local rivals.

“But we haven’t seen this movement becoming concrete, and the explanation for that is that our members are in China for the Chinese market,” de Boisseson told a news conference.

“And the business environment in China has a lot of advantages which make manufacturing in China very competitive compared to having it in other countries,” he added.

De Boisseson was releasing the chamber’s annual position paper, which renewed a long-standing call for equal access to China’s markets and expressed concern that Beijing was backsliding on regulatory reform.

“We need a market which is open, fair, transparent and predictable,” he said. “Improved market access and a better playing field — we are convinced of that — will help China’s transition to a more balanced growth model,” he said.

De Boisseson said he would not recommend that European firms stop investing in a country with such strong growth prospects. But companies were concerned that the business barriers they were encountering would dent profitability.

“The Chinese government should be careful about its policies, and there is a risk that in future investment might be reduced,” he said.

The chamber said that less than 3 percent of EU outbound foreign direct investment in 2008 went to China because of the obstacles or risks of doing business in the world’s second-largest economy.

It gave the example of how foreign-invested enterprises (FIEs) are in practice barred from obtaining a wholesale license to sell petroleum products.

To qualify, a company must own a refinery and obtain an import license. But Chinese law limits foreign ownership of a refinery to 49 percent, and no foreign firm has ever been awarded an import license. “In other words, it is impossible for an FIE to own a refinery,” the report said.

De Boisseson said the chamber had been encouraged by assurances by Chinese officials from Premier Wen Jiabao down that overseas firms would be treated on a par with their local rivals.

“But the proof is in the pudding,” he said. Business wanted words to be matched by deeds, especially on certification, public procurement and intellectual property rights, he added.

EU firms grumble that China’s compulsory certification requirements, discriminatory government procurement practices and preferential treatment for products containing indigenous intellectual property all unduly restrict their market access.

“When it comes to strategic investments in particular, European investors continue to be heavily constrained in areas ranging from telecom services, to insurance, construction and the automotive industry,” the paper said.

(Editing by Ken Wills)

Topics Europe China

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