EU Enterprises Appeal for Equal Access in China: EU Chamber

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eu enterprises in China are calling for equal access to the Chinese market, therefore they can be a catalyst to accelerate china’s economic rebalancing, according to the european Business in China Position Paper 2012/2013 released by the European Union chamber of Commerce in China.

At present China holds a historic opportunity to raise its economy to a new level. To achieve this, a prompt and fundamental shift is required to carry out necessary economic rebalancing.

“The state-led investment model has fostered 30 years of breakneck growth and lifted millions out of poverty, but it is no longer sustainable. Now productivity returns on investment are more difficult, healthy competition is needed to ensure efficient capital utilization and to encourage private capital investment, as well as to drive income and consumption growth, but most notably, to breed innovation,” said Davide Cucino, President of the European Chamber.

The 12th Five-Year Plan recognized this need for change. With signs of over-investment and poor productivity returns already perceptible and with China’s demographic dividend coming to an end, these changes are now urgently required not only for China, but also for global economic growth.

China possesses the necessary ingredients, including the technology and physical infrastructure bases, as well as the human capital, to make this shift.

However, “China places conditionality on the opening of markets to foreign investment. This produces an asymmetry in the level of openness versus the EU marketplace which remains resiliently open. To realize the new growth model and avoid the middle-income trap, bias against foreign and domestic private investment must change,” Mr. Cucino said.

“Equal access for all is needed, not only to markets, but to public procurement, treatment under the law, finance and subsidies and technology innovation,” he added.

Market access has long been the major concern of European business in China. Some foreign-invested enterprises feel that they suffer from unequal treatment owing to joint venture and licensing requirements, causing asymmetry in market access conditions for FIEs between the EU and China, according to the EU Chamber.

European industry has committed to China and is willing to further invest, but in times of economic difficulty and constrained markets, the need for equitable treatment that provides fair opportunity for sustainable returns on investment becomes a much greater consideration when weighing up investments.

The advanced, high-tech and green technologies and services of European companies not only provide better choice and value for Chinese consumers, European industry investment also leads to a willing transfer of skills, technologies and processes to Chinese companies. Most importantly, however, is the enhancement of international competition in the Chinese marketplace.

To stimulate innovation, “policy focus should serve to provide the market conditions of fair and equal competition and to assist private sector development. FIEs should be recognized as an essential partner and player in the drive to stimulate Chinese indigenous innovation of cutting edge technology, rather than pushing industrial policies that discriminate against FIEs,” the paper suggested.

So far, European companies are the largest contributors of technology to China, with 36,730 items of technology worth EUR 100 billion of contract value having already been transferred by September 2011.

“However, European companies would bring more technology to China and, importantly, develop more technology in China if the business environment was made less discriminatory,” said the paper. “With a more business friendly environment, not only would European technology transfers increase to China-based entities, but China would be further transformed into a place where European companies, in partnership with Chinese entities, would innovate and build new technologies.”

However, in recent years some improvements have been made in the China’s business environment. In the area of aviation, China has approved Computer Reservation Systems regulations to allow limited foreign market access. The Civil Aviation Administration of China has approved the longawaited Interim Computer Reservation Systems (CRS) regulations, which will allow limited market access for foreign CRS providers into 5% of China’s market, as a first step. This issue has long been highlighted by the EU Chamber as a key market access barrier and so the regulations are greatly welcomed.

In the area of insurance, China has opened mandatory third-party liability insurance for motor vehicles to foreign-invested insurance companies. Decision 618 of the State Council in March 2012 announced that the market for mandatory third-party liability insurance for motor vehicles would be opened to foreign-invested insurance companies as of May 1, 2012. This means that all insurance companies, including foreign insurers, will be allowed to sell mandatory minimum coverage for motor vehicles, which represents more than 70% of the nonlife insurance market. As such, the EU Chamber looks forward to the release of implementation details.

In terms of ICT, China has opened national ICT research projects to foreign enterprise participation. In April 2012, restrictions were removed on foreign-invested enterprise applications to participate in key national ICT research projects, namely the Chinese National Significant Science & Technology Project and the 863 Project.

In terms of information security, a China Compulsory Certification for Information Security Products (CC-IS) license was granted for the first time to a WFOE in May 2012.

The Position Paper is the EU Chamber’s primary annual publication. The 13th annual edition of the Position Paper offers both Chinese and European policy-makers over 600 recommendations that draw directly from the knowledge and expertise of the EU Chamber’s 1,700 member companies. The recommendations were formulated over a six-month consultative process by 35 separate Working Groups, covering 26 vertical industry sectors and 9 horizontal cross-industry sectors.