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2008-11-25 | All chapters
EU businesses say property is key to China outlookJason Subler , Reuters, 25th November 2008
Prospects for European companies in China in the near term will depend mainly on whether the government is able to jump-start the ailing property sector, the European Union Chamber of Commerce in China said on Tuesday.
Property prices and sales volumes have fallen sharply in some parts of the country, contributing to an economic slowdown that the World Bank says could yield growth of just 7.5 percent next year -- the slowest pace since 1990.
Seeking to avert a sharp slowdown, the government has announced plans to spend more on low-cost housing and eased requirements for obtaining mortgages to buy a home, in addition to other spending plans and monetary easing.
It is vitally important to EU firms that the measures on property bear fruit because that would in turn stimulate demand for the appliances and other products many of them sell in China, said Joerg Wuttke, the EU Chamber's president.
"Kick-starting of the real estate sector has probably the biggest impact on the real economy when it comes to the bigger items that European companies are interested in," Wuttke told a news conference.
Wuttke was speaking at the launch of a survey that found 70 percent of EU firms in China turned a profit in 2007, an improvement from the year before.
He noted that their near-term prospects were now much less certain, although China would probably only grow in importance for European firms once the current financial crisis has passed, given its sheer size and the speed at which it is growing relative to other countries.
Wuttke praised Beijing for sending a signal of confidence by announcing a 4 trillion yuan ($586 billion) fiscal stimulus package earlier this month, but he said firms were still waiting to see more detail on how those plans would be implemented and how much of the spending would happen in the near term.
EU companies were also worried about the transparency of the spending and whether they would have a fair chance at winning contracts, he said.
"I heard concern from members, they say that in this procurement mechanism that they might be disadvantaged and that there might be a strong focus on getting the domestic companies basically preferred," Wuttke said. "But I think that remains to be seen."
Wuttke also cautioned about a potential rise in protectionism as the United States and Europe enter recession, saying Chinese firms, especially in the steel industry, should be careful not to stoke such sentiment by flooding those markets with exports as domestic demand wanes.
"In a recessionary environment in Europe, if Chinese companies, especially in steel, are trying to export more to save themselves here, this will lead to a major problem in the trade relations between Europe and China," he said.
Source: http://uk.reuters.com/article/stocksAndSharesNews/idUKLNE4AO00J20081125