GUANGZHOU, CHINA (Sept. 14, 11:15 a.m. ET) — China is moving too slowly to open its markets and in some cases has added barriers for foreign companies in the last year, according to a new report from the European Union Chamber of Commerce in China, the largest European business group in the country.
The EU Chamber's annual lobbying report, its 12th, said that China has made some improvements and it argued that European companies can help China with the goals of its new Five-Year Plan, such as industrial upgrading, green technology and developing the services sector.
But the Beijing-based chamber's report said foreign companies are still not treated equally in China in both written laws and implementation, and it raised questions about what it said are recent steps that further limit China's market to foreign firms.
Speaking at a Sept. 13 presentation in Guangzhou, EU Chamber President Davide Cucino pointed to new rules in China's “Catalogue of Industries For Guiding Foreign Investment” that now limit foreign companies making auto parts for new-energy vehicles to a maximum of a 50 percent stake in joint ventures.
He also said there are concerns about technology transfer requirements in areas like wind energy, along with broad restrictions on service industries like banks and telecom companies.
“We do not want preferential treatment,” he said. “We look for equal treatment.”
The chamber said it was enthusiastic about the 12th Five-Year plan the government unveiled in March because many of its priorities are strengths for European industry, and EU firms can help China rebalance its economy away from exports to promote domestic consumption.
But the release of a new version of the important foreign investment catalogue a month later seemed inconsistent in places with the Five-Year Plan, the chamber said.
“The April 1, 2011 release of the revised draft [of the catalogue]… came as a disappointment insofar as there was little progress from the previous version,” the chamber said. “What European companies really want is increased market access.”
The chamber also argued that restrictions on government procurement in China – estimated to be 20 percent of its economy – makes that market “de facto out of bounds for foreign companies.”
By contrast, it said that Chinese companies are free to bid on contracts in EU government procurement markets, which it called “globally the most open.”
As well, chamber officials at the Guangzhou event called for more transparency in Chinese government policy making. The decision last year to substantially increase the minimum wage in many of China's export-oriented regions around Guangzhou and Shanghai came with little warning, making it much tougher for companies to plan, the chamber said.
Cucino said China has made improvements in areas of concern to EU firms, including in intellectual property, where he said the country has made “big improvements” in the last year.
While the EU Chamber report raised concerns – with 600 recommendations for Chinese policymakers compared with 380 in last year's version – European businesses do not seem to be showing any sign of slowing their investment, chamber leaders said.
Holger Kunz, chairman of the board of the EU Chamber's Pearl River Delta chapter, said the opportunities companies see in China's rapidly growing domestic market are outweighing problems.
“Even though companies have a list of issues, they are still willing to invest in China,” he said.