March 7, 2017 11:39 pm JST

EU lobby slams China's 'equal treatment' for foreign companies

Beijing's manufacturing initiative seen as 'highly problematic'

MARIKO TAI, Nikkei staff writer

President of the Chinese chapter of the European Union Chamber of Commerce Joerg Wuttke criticises China's protection of key industries and high barriers of entry for foreign companies. (Photo provided by the chamber)

BEIJING -- The reality of China's off-limits market does not reflect Beijing's pledge of "equal treatment" for foreign enterprises, and its promotion of domestic manufacturers could distort the global market and cause job losses, the president of the European Union's business lobby said Tuesday.

The EU Chamber of Commerce expressed growing concern with Beijing for its practice in "a consistent approach to industrial development driven by political masters, not [the] market," the group said in a statement Tuesday. Such an approach is especially felt in technology-driven sectors including information technologies, new energy buses, medical devices and biopharmaceuticals which "remain largely closed to foreign suppliers," said Joerg Wuttke, president of the Chinese chapter of the chamber.

The sectors he mentioned are covered under "Made in China 2025," a Beijing-led initiative outlined two years ago. The initiative is aimed at encouraging Chinese companies in 10 industries to supply its own high-tech components by 2020 and materials by 2025.

The report by the EU Chamber of Commerce comes during the annual National People's Congress. At his opening remarks at the Congress on Sunday, Premier Li Keqiang told parliament that under the manufacturing initiative, foreign companies "will enjoy the same preferential policies" as local entities.

However, the reality is that foreign enterprises are facing high barriers to entry to the Chinese market. They are "facing increasing pressure to hand over [their] advanced technologies in an exchange,"Wuttke said.

This is in turn making EU companies less motivated to invest in China. "It is changing the perception of China in public, particularly in Germany. People are increasingly questioning that unfairness," said Wuttke.

EU investments in China declined by 23% to 8 billion euros ($8.4 billion) in 2016 from 10 billion euros the year before. While EU companies have become more reluctant to make investments in China, the report said Chinese investments in the EU increased to 35 billion euros, a jump of more than 77% from the year before.

China's aggressive investments in recent years include the acquisition of German robot-maker Kuka by China's appliance giant Midea Group, and Volvo by Chinese carmaker Zhejiang Geely Holding Group.

Beijing's manufacturing initiative is seen as being "highly problematic" to European businesses, the report said. "State-funded global champions are going to the EU and buying off companies and crowding out other market players," Wuttke said. "We are worried that the state intervention might distort the markets and lead to job losses."

Mounting concerns of the initiative is only adding to frustration about Beijing's lackluster efforts to cut excess capacity. Premier Li on Sunday promised to cut production capacity for coal by 150 million tons and steel by 50 million tons. But the EU business lobby brushed aside the promise by saying that "his speech pretty much resembles what it was last year, and there was not much [action] in a positive sense."

Asia300

Midea Group Co. Ltd.

China

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