European firms say China business 'more difficult'

PARIS: European companies complain they still face a difficult business climate in China despite Beijing’s pledges of openness, with about half saying it has become tougher in the past year, according to a survey released on Wednesday.

The study comes as President Xi Jinping looks to portray the world’s number two as being at the forefront of the globalisation while trade tensions with the United States rise.

“The root of the tension we see today starts with a China that has not opened up and reformed as quickly as it promised in its rhetoric,” said Mats Harborn, president of the European Union Chamber of Commerce in China.

Among the litany of complaints for European companies were the uncertain legal environment, higher cost of labour, regulatory headaches and the “Great Firewall” that censors much of the global internet.

“As its economy matures, the longstanding inefficiencies in China’s business environment are rendered all the more glaring,” according to the report by the EU chamber.

Harborn told reporters that the “regulatory environment is actually holding the economy back.”

“Time is running out for China to continue its reform process,” Harborn said, noting 2018 must be the year Beijing acts.

Instead Beijing has backtracked in some areas. New cybersecurity regulations make it more costly to jump the firewall, requiring businesses to sign up for expensive and problem-plagued government-approved virtual private networks that allow users to circumvent filters and access the global internet.

Two-thirds of companies believe that censorship and blocking of certain sites has a negative impact on their business, while only 23 percent say the state-sanctioned VPNs are efficient.

This is the “great contradiction,” said Harborn.

“We have China which claims itself a leader in globalisation, talking of the importance of integration, but the cybersecurity law is creating problems.”

The survey found 48 percent of European firms felt it had become “more difficult” to do business in the past 12 months.

And a fifth say they have been victims of forced technology transfers, a practice denounced fiercely by Washington as it carries out a probe on the issue while threatening tariffs in retaliation.

And there is little optimism for the future as nearly half of European businesses believe barriers to business will harden in the coming five years, while a quarter believe they will never witness a “significant opening” of the market.

But progress was reported in some areas.

Some 61 percent of the 532 European companies polled by the chamber said they are “optimistic” about the growth of their sector in the country, compared with 55 percent the previous year.

Just over half of surveyed companies, 51 percent, consider that they are treated “unfavourably” compared to their local competitors, compared to 54 percent last year.