China fails to meet wen pledge on market access

The European Union Chamber of Commerce in China said discriminatory laws and regulations still stymie its members from participating in the world’s second- biggest economy.

China’s government hasn’t lived up to Premier Wen Jiabao’s pledge last year that foreign companies would receive equal treatment, the business grouping said in a 338-page report released today.

“Despite these welcome and promising words, they do not reflect daily operations,” the chamber said. “There remains a prevalence of long-standing market access barriers, laws and regulations that unambiguously discriminate against foreign companies, as well as the biased and subjective implementation of laws and regulations.”

China’s aim to move from investment-led growth to an economy driven more by consumption is at risk unless it builds on policies initiated a decade go as the country was entering the World Trade Organization, said Davide Cucino, the chamber’s president. “Further opening of the market to both domestic private industry and foreign-invested enterprises is necessary to give play to sustainable driving forces,” the report said.

Carmakers must take a Chinese partner and are limited to a 50 percent stake in their ventures, while telecommunication companies are effectively shut out from the world’s biggest mobile phone market, the report said. Foreign banks’ ownership of domestic financial firms is capped at 20 percent, and overseas wind-turbine makers must tie-up with local rivals on the grounds of “national security,” it said.

VW, HSBC

The EU is home to some of the biggest foreign firms doing business in China, including German carmaker Volkswagen AG, Munich-based engineering company Siemens AG, London-based HSBC Holdings Plc, and Danish windmill-maker Vestas Wind Systems A/S.

China’s government had made progress in several areas that were important to the business group, Cucino said. These included stopping the implementation of rules that may have blocked foreign companies from government procurement contracts and the repeal of a domestic subsidy for wind turbines.

Discriminatory rules also haven’t stopped European companies from boosting sales and profit in China. A May report by the EU chamber found 78 percent of companies surveyed said they had a “significant rise” in China sales last year, compared to 50 percent in 2009. Seventy-one percent said they reported higher profit in China last year, up from 43 percent in 2009, according to the poll of 598 EU companies doing business in China.

“They are not treated equally compared with their competitors but still they are willing to be here,” Cucino said yesterday.