Beijing — A report released by the European business group on Wednesday said uncertainty and “strict regulations” have significantly increased risks for foreign companies in China.
A lengthy document by China's European Union Chamber of Commerce and Industry calls on Chinese leaders to do more to address concerns that the Chinese side says have “expanded” in recent years.
“This report comes at a time when the global business environment is becoming increasingly politicized and companies are being forced to make very difficult decisions about how, and in some cases, whether they can continue to engage with the Chinese market. announced,” the report said.
The study, compiled by the chamber and consultancy China Macro Group, reflects concerns raised by Western companies operating in China. Overseas investment fell 8% last year from a year earlier as companies readjusted their efforts in the world's second-largest economy.
EU Chamber of Commerce officials said changes in China's business environment partly reflected Beijing's efforts to minimize risks from trade tensions and dependence on imports of key goods and industrial products. said. This is especially true given trade tensions with the United States and discussions about “decoupling” supply chains from China after disruptions during the COVID-19 pandemic.
But European companies also need to manage their own risks, he said.
China has recently been trying to emphasize its openness to foreign companies and investment. A Commerce Department spokesperson said the country is working to ensure 100% access to manufacturing by eliminating remaining trade barriers.
China's State Council on Tuesday released an update to an action plan it announced in July to further encourage overseas investment, particularly in growth-friendly high-tech sectors such as computer chips, biopharmaceuticals and advanced equipment. It promised tariff exemptions and called for an end to practices that discriminate against foreign companies.
However, there are some actions that go against that spirit of openness. Raid raids on foreign companies in China, opaque state secrets laws and tougher data handling rules are causing anxiety for many foreign businesspeople in the country.
“The number and severity of risks that businesses have to deal with has increased dramatically in recent years,” Jens Eskelund, president of the China-European Chamber of Commerce, told reporters at a press conference ahead of the report's release. “There is,” he said.
At the same time, the Chinese government has not addressed many of the issues raised by foreign companies. This includes access to government procurement contracts, which is crucial given the large role of state-owned enterprises in the economy.
This is especially difficult for medical device companies and R&D. Meanwhile, pharmaceutical companies are “very wary of data security regulations that make clinical trials impossible,” said Marcus Herman Chen, co-founder and managing director of China Macro Group.
“We are still the oddballs and this needs to change,” Chen said.
Part of this challenge stems from China's focus on national security in terms of its dependence on technology essential to its industries. This strategy is being driven in part by U.S. efforts to cut off business with Huawei and block the sale of cutting-edge computer chips and the equipment needed to make them.
U.S. companies have expressed similar concerns. Sean Stein, president of the American Chamber of Commerce in China, recently said that China has made progress in addressing some issues but not others.
“The business community would like to see more clarity from both sides on the definition of national security and how it is determined,” he said before an annual floor dinner with Chinese officials. said in an interview. And we need certainty. ”
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“It's difficult to understand how a 300 euro (about 33,000 yen) bottle of XO can be charged with dumping,” Eskelund said.
China, for its part, is unhappy with the European Union's ongoing investigation into China's electric vehicle subsidies and whether it gave Chinese manufacturers an unfair advantage in the European market.
Meanwhile, on cybersecurity, Eskelund said, “We've seen some very strict new regulations coming out in China.”
He said Europe's approach to trade and investment issues was “targeted, very limited and very focused on eliminating 'key dependencies' rather than competing with China.” ” he said. But companies still need to be risk-averse and can be blindsided by policy changes.
At the same time, companies also face the risk of retrenchment and need to bring their “best of the game” to China, especially after the shock of the pandemic, when entire cities were locked down and factories at times halted production. , some companies feel they are too exposed. .
The Chinese market is “becoming less predictable, reliable, and efficient,” partly due to the increasingly politicized business environment, the report said.
Governments need to recognize the challenges posed by uncertainty, or the “very short outlook at the moment”. We have no idea what's going to happen six months from now,” Eskelund said.
“Help us understand what's in the pipeline and prepare for a future that we know for sure will be different,” he said.
