European Companies Complain About the Treatment

The Chinese authorities continue to discriminate against foreign companies, mainly for the benefit of local state-owned corporations. That is the conclusion of the European Union Chamber of Commerce in China, the EUCCC in Beijing yesterday presented its annual report, the European Business in China Position Paper 2011/12.

The European Union Chamber of Commerce, which represents about 1,600 companies with investments in China, complaining of “lack of progress in eliminating barriers” and “increased measures that restrict market access.”

Davide Cucina, chairman of the Chamber, further alleged that China “still intends to impose (foreign companies) a lot of technology transfer” in exchange for access to its market. In recent decades, the authorities have successfully implemented these policies in areas such as renewable energy, rail or automobile.

“We do not want privileges, but we need to be treated equal,” said Cucina, who explained that the most important difference in treatment observed between large state-owned enterprises and private companies, whether local or foreign.

In China, many strategic sectors are reserved, legally or de facto, to large public corporations, which enjoy, in addition, preferential financing by banks, which also in state’s hands. The obstacles are particularly serious in the automotive, financial services, telecommunications, construction and offshore wind energy.

European companies fear this trend will grow. A survey of the Chamber last April shows that 46% of companies believe that discrimination will become more severe over the next two years.

The trend in figures

The figures for foreign direct investment (FDI) reflect this mood. The FDI of the European Union in China fell 15% last year from 5,800 million euros in 2009 to 4,900 million in 2010.

Some analysts say that officials of the Communist Party (CCP) have changed their attitude following the global economic crisis mainly afflicting the developed countries since 2007. In this view, the authorities have become much more proud of their model.

Cucina insisted, however, about the idea that China “is running out of time” to change its development model and avoid falling into the “middle income trap.” Also argued that reform objectives of the growth pattern of the 12th Five-Year Plan are consistent with the strengths of European companies that can help China to obtain more balanced, more advanced and greener technology.