Transcript European Chamber Business Confidence

Jacques de Boisséson
Vice President
European Union Chamber of Commerce in China
October 8, 2009
1
The Voice of European Business
in China
9th annual Position Paper
Over 500 recommendations from the 1,400 member
companies of the European Chamber
Proposals developed over the last 6 months by the
European Chamber’s 34 industry-specific Working
Groups and Forums
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1. Changes in the Last Year
• China rising in importance for European business, but
market access barriers are rising too in some
sectors
• Financial crisis has increased the threat of
protectionism – Chinese government intervention
and restrictions are growing
• In many sectors a slowdown – and in some cases
partial reversal – of the reforms of recent years
• European business calls for further measures to
create a more transparent, freer and fairer market
environment
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1. Changes in the Last Year - Key issues
The Position Paper 2009/2010 highlights progress:
• Laws: Food Safety, Postal, Insurance and the Circular
Economy Promotion Law
• Financial sector: foreign banks were granted the right
to trade RMB corporate bonds.
• IT sector: more competitive environment through the
3G licensing process.
• Tourism: lowered barriers for in-bound tourism.
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1. Changes in the Last Year - Key issues
The Position Paper 2009/2010 highlights also ongoing
problems in the areas of:
• Market access
• Transparency in the legislation and implementation
• Intellectual Property Rights (IPR)
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2. Market Access
Market Access
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2. Market Access
• European Chamber Business Confidence Survey
2009 highlighted rising importance of China’s
market
• The barriers to trade & investment in China were
estimated to cost EU businesses EUR 21bn in lost
trade opportunities every year (2006 study)
• China ranked 83rd in the world in a World Bank study
on “ease of doing business”
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2. Market Access
Joint venture (JV) requirements hindering market
development
Example: JV requirement in the auto sector
• Chinese companies are acquiring EU car makers abroad - in
contrast, European companies must still enter 50/50 JVs in
order to manufacture locally, and have a cap of 2 plants
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2. Market Access
Public procurement process – a troubling absence
of equal treatment for domestic and foreign companies –
even locally incorporated foreign companies
Bids by 4 foreign-invested wind energy companies in Shanghai,
Shandong and Tianjin for a 5-bn-euro project for 25 sets of wind
turbine generators were rejected in the first round
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2. Market Access
Technical regulations & certification procedures
blatantly discriminate against foreign-invested businesses
OSCCA (Office of Security Commercial Code Administration)
certification for a locally incorporated foreign company in the
commercial encryption technology industry
• The company was for many years the market leader in providing
encryption solutions for Chinese banking, telecom and public
transportation companies (mostly SOEs)
• This situation worked well, until new regulations suddenly required its
clients to use products from OSCCA-certified companies
• Not one foreign company or foreign-invested Chinese company has to
date received OSCCA certification
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2. Market Access
Service sector
Outright exclusion of foreign companies is hindering both the development
of domestic consumption and the improvement of service levels offered to
Chinese consumers
Provision of foreign CRS (Computer Reservation Systems) to
Chinese travel agencies and airlines
• Almost 7 years after China’s entry into WTO, no progress in opening
the CRS market to fair competition
• Approval processes required by the GATS commitments simply do
not exist
• Without even the option of an approval process, European CRS
providers have no way to access the growing Chinese market
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Transparency in
Legislation and
Implementation
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3. Transparency in Legislation and
Implementation
• Lack of transparency in the rule-making process, along
with discretionary enforcement of laws and regulations
• Some improvement in terms of public consultation – e.g.
two rounds of comments on the Anti-Monopoly law
• But problems in legislation and implementation processes
remain – ranked #1 in the European Chamber Business
Confidence Survey 2009 list of obstacles to doing business
in China
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3. Transparency in Legislation and
Implementation
Time granted for public consultation is
inconsistent and short of international best practices
In 2008, average 24 Days
- an improvement (21 days in 2007)
Still short of international best practices
- WTO and European Commission recommend about 60 days
Lack of consistency
- Some calls open for 60 days and some for 2 days
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3. Transparency in Legislation and
Implementation
Limited consultation on draft regulations, and
often only with selected groups
Public consultation is important because it allows the
business community to understand government decisions
and to contribute to finding solutions to technical problems
The Green Dam Mandate
• Promulgated in May without meaningful consultation with industry
• When given access to the software, industry quickly found issues
and problems
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3. Transparency in Legislation and
Implementation
Not enough explanation and analysis of
important decisions and key cases
Coca-Cola vs Huiyuan Merger case
• No substantive analysis or evidence supporting the rejection of this
merger
• Not enough guidance on this complex law, which doesn’t help to
dispel suspicions of protectionism
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3. Transparency in Legislation and
Implementation
Unfair enforcement of laws and regulations
European Chamber Business Confidence Survey 2009:
• 66% of respondents report that enforcement of the environmental
regulations on Chinese firms is weak, while just 18% reported that
China’s enforcement on foreign firms is weak.
• This is in essence a hidden subsidy for heavy polluting local
companies whose flouting of laws goes unpunished.
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Intellectual Property
Rights (IPR)
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4. IPR
• The National Intellectual Property (IP) Strategy has set the path
for the development of Chinese IP rights. However, more needs
to be done to improve the protection of IP rights so as to
promote innovation
• European Chamber Business Confidence Survey 2009:
Vast majority of companies consider the enforcement of these
laws and regulations as inadequate (56%) or very inadequate
(30%).
• In the long run, the lack of protection is discouraging and will
continue to discourage European businesses from investing here.
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4. IPR
Leakage of confidential information during
business development
Project approvals, product certifications, patent filings, etc.
CCC (China Compulsory Certification) process, a precondition to
market access for 130 product categories
• Highly confidential information requested by testing laboratories that
goes far beyond the scope necessary for certification
• Unfortunately, leakage to Chinese competitors not uncommon
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4. IPR
• Draft rules of Patent Law will make European
businesses less likely to do R&D in China
• The rules stipulate that companies must submit
innovations for “confidentiality assessments” in China
before filing for patents abroad
• Concerns about information leakage and ownership
rights to these innovations
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Impact of
EU Business in China
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5. Impact of EU Business in China
China is important for the EU
but also the EU is very important for China
• EU’s exports to China = 0.7% of EU GDP
China’s export to the EU = 7% of China’s GDP
• About 40% of technology transfers introduced to China through
imports and investments originated in the EU
• 20% of all Chinese exports in 2008 went to the EU (USA 17%, JP 9%)
• A 1% decline in EU GDP growth would lead to a 11.5% decline in
Chinese exports (just 9.8% for US)
EU Businesses are aligned with China on the
importance of keeping EU markets open
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The Way Forward
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6. The Way Forward
A new round of opening up and reform with a
clear timetable is needed to lead China to a sustainable
economic recovery
• Economic crisis: a prime opportunity to restructure
– China has always benefited in times past from opening up its market
• Further opening up & fundamental reforms – now needed
• Build a predictable, transparent, fair business environment for all
companies operating in China
• Boost investment and domestic consumption and enable the Chinese
economy to achieve its latent potential
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Q&A
问 答
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