Is China targeting foreign firms?

Is China targeting foreign firms? According to the American Chamber of Commerce in China, nearly half of foreign businesses believe they are being specifically picked on.

The survey, Challenges and Opportunities in China’s Investment Environment 2014, reports that a large number of foreign companies wonder whether China will lose its attraction as an ideal place in which to invest.

The authors added that major sectors of China’s economy still lack urgently-required investment because of burdensome laws, regulations and practices.

A difficult transition expected

Gregory Gilligan, Chairman of the American Chamber of Commerce in China (AmCham China), said:

“As China’s economy rebalances from a state-led model based on exports and investment to a market-led model based on services and consumption, a difficult transition is to be expected for all private sector companies in China. Today’s update on our view of the investment environment, combined with what we are hearing from our members, demonstrates that the transition is indeed disruptive, perhaps more so for foreign companies, and progress on reform has been disappointingly slow.”

Greg Gilligan
Mr. Gilligan says half of all foreign companies believe they are being picked on.

“Since we analyzed the investment environment last year, there have been many encouraging promises of reform, but the environment for many foreign companies has nevertheless deteriorated. While we still believe in China’s ability to make the changes necessary to transition to the next stage of development, delays and disruptions are leading foreign investors to alter their perceptions of the China market in fundamental ways.”

Foreign companies feel less welcome today

A survey carried out in August found that:

  • 60% of respondents believe foreign companies in China today are less welcome than they used to be.
  • 49% of foreign companies say they have been singled out in China’s recent anti-corruption and pricing campaigns.

While enthusiastically supporting China’s integration into the worldwide economy, Mr. Gilligan noted that among his AmCham China members, positive sentiment is declining.

The AmCham China is concerned that the investment environment may erode so far that key relationships and linkages between China and other countries will be materially damaged, seriously undermining the world’s second largest economy’s ability to continue being a magnet for investment.

Without foreign investment, it is doubtful China would be able to reach the next stage of economic development.

China disagrees

At a regular briefing in Beijing on Tuesday, Qin Gang, a Foreign Ministry spokesman, said his country’s anti-monopoly measures are fair, transparent and carried out according to the law.

Mr. Gang said:

“China will as always welcome foreign companies and enterprises to develop cooperation in all fields and build a good market economy. At the same time, we request foreign companies observe Chinese laws while in China.”

Xu Kunlin, who is in charge of the Anti-Monopoly Bureau at the National Development Reform Commission (NDRC), said the foreign companies’ allegations are “groundless and baseless.”

In an interview with state-run China Daily, Mr. Kunlin said:

“Some business operators in China have failed to adjust their practices in accordance with the Anti-Monopoly Law,” he said. “Others have a clear understanding of the law, but they take the chance that they may escape punishment.”

Some Chinese regulatory officials leave westerners bemused. In May, after food inspectors visited just one diary in England, China said it would ban British cheese imports. The UK press commented on the bizarre inspection (just one dairy) and decision. Britain sells very little cheese to China, compared to other nations. UK Farming Minister, George Eustice said he could not understand why an “irrelevant” dairy that has never sold anything to China was inspected.

Since French pharmaceutical company Sanofi was involved in a bribery probe last year, China has investigated hundreds of foreign firms.

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