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2009-07-02 | All chapters

Firms Cite Challenges for China
Ian Johnson, Wall Street Journal, Page B6, 1st July 2009

BEIJING -- China remains a haven of growth but longer-term problems are brewing for the world's third-largest economy, according to a survey of about 300 companies by the European Union Chamber of Commerce in China released Tuesday.

With economic growth in China expected to top 6% this year, most companies said they were optimistic about the nation's prospects. Three-quarters said conditions in China are better than in their home countries, largely because of China's giant stimulus package.

"It's doing better than Europe or the U.S.," said Charles-Edouard Bouée, head of Asia for Roland Berger Strategy Consultants, which helped put together the survey. "But there are strategic flaws that need to be fixed."

The survey showed differences in perception between foreign companies and the Chinese government. While the official line in China is that the worst of the downturn is over and the economy is headed toward recovery, only a fifth of companies surveyed believed the economy would turn the corner this year. Almost half said it would take until the first half of next year to recover and 19% said a recovery would happen in the second half of 2010.

One longer-term concern is the current stimulus package, which includes a combination of new and previously disclosed spending on public works and services totaling four trillion yuan, or about $585 billion.

Businesses say the package is welcome but won't solve China's structural problems. Only 13% said it would help in the long run, with China needing more competition and fewer monopolies.

EU Chamber President Joerg Wuttke said many companies feel that China's new, tougher environmental laws are strictly enforced when it comes to foreign companies but only sporadically enforced for Chinese companies.

The survey showed a widespread belief that China hasn't lived up to promises made when it joined the World Trade Organization.

Source: http://online.wsj.com/article/SB124632773519171543.html

For the European Chamber's Press Release on this Business Confidence Survey, please click here.