Chinese Barriers Cooling EU Investment Appetite, Ashton Says Go back »

2009-09-08 | Beijing, Shanghai, Southwest China, Nanjing, Shenyang, Tianjin, South China

Chinese Barriers Cooling EU Investment Appetite, Ashton Says
Jennifer M. Freedman, Bloomberg, 8th September 2009

Sept. 8 (Bloomberg) -- China must lower trade barriers and do more to protect intellectual-property rights or risk losing foreign investment, European Union Trade Commissioner Catherine Ashton said.

"With global competition for the best investment rising, governments should be seeking to attract not restrict investment,” Ashton said today at an investment fair in Xiamen, China. “Barriers in China not only cost European business, but also deprive the Chinese economy of investment inflows and significant tax revenues.”

A number of what Ashton called “warning signs” have emerged, signaling that China and EU are growing skeptical about investing in each other. EU investment in the world’s fastest- growing major economy dropped to 4.5 billion euros ($6.5 billion) last year from 7.1 billion euros in 2007, while Chinese investment in Europe fell by half a billion euros.

While part of the decline stems from the impact of the global financial crisis on capital markets, “this is not the whole story,” Ashton said. “Foreign direct investment should not be curtailed by equity caps, unnecessary joint-venture obligations or restrictions in sectors considered strategic.”

EU-China ties have soured in recent years amid growing European criticism of China’s human-rights record and its failure to crack down on counterfeiting, plus a rash of trade spats. While China is the 27-nation EU’s second-largest trading partner, the Asian nation is attracting “much less” foreign direct investment from Europe than other emerging economies such as India, Brazil and Russia, Ashton said.

Ownership Caps

China is backsliding on reforms to open its economy to foreign business, which are impeded by a lack of legal and political transparency and violations of intellectual-property rights, the EU Chamber of Commerce in China said last week. Forced joint ventures and ownership caps are making China less appealing as an investment destination for many European companies, the chamber said.

Europe’s carmakers, for instance, can’t establish their own manufacturing facilities in China and must operate via 50-50 joint ventures, it said. And local governments are required to buy Chinese products for projects under China’s 4 trillion-yuan ($585 billion) stimulus plan.

"Protection of intellectual property, especially patents, is also crucial if more companies are to bring their ideas and their technology to China,” Ashton said. “Without the promise of protection for their innovations, European companies are sometimes hesitant to invest here. It is therefore very encouraging that the Chinese leadership sees the necessity of a well-enforced IPR system as a stepping-stone to future economic development.”

Chinese Premier Wen Jiabao said on June 25 that the nation didn’t discriminate against foreign enterprises or products.

Source: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aw.VrU9DioQg