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2008-09-11 | All chapters

EU Group Finds China Protectionism Concerns Foreign Firms
Andrew Batson, Wall Street Journal, 10th September 2008, Page B3

BEIJING -- Foreign companies are worried by protectionism and regulatory problems in China that can block their investments and acquisitions, a European business group said Tuesday.

"Our members felt the regulatory climate has failed to keep pace with China's growth, and there's growing economic nationalism that's of concern to us," said Joerg Wuttke, president of the European Union Chamber of Commerce in China, which represents about 1,300 companies operating in the country. "In general we have the feeling that the reform process has slowed down."

Releasing its annual position paper, the chamber said China had made progress by relaxing rules governing banking and transportation, reducing overlap between government ministries and improving oversight of the energy sector. But foreign companies are still often barred from participating in bodies that set industry standards and from receiving lucrative business contracts, according to the report.

Most European companies remain optimistic about their prospects in China, thanks to its continued economic growth and increasing ties with the outside world, Mr. Wuttke said. But the companies are also concerned by regulations and trade barriers that keep the China market from living up to its potential.

The European Union exports more to Switzerland or Russia than it does to China, he said, while new investment into China from Europe has slowed and now accounts for 5% of all foreign investment.

Mr. Wuttke said the drift toward protectionism or economic nationalism was driven less by popular sentiment than by "economic interest groups" that are seeking to protect their position in the China market and exclude foreign competitors.

Mergers and acquisitions are a particularly difficult area, Mr. Wuttke said.

Source: http://online.wsj.com/article/SB122095259451614361.html?mod=googlenews_wsj

Click here to view the European Chamber's press release on the Position Paper.

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