Europe lobby warns on China market barriers

Posted on September 1, 2016

The Chinese (C) and the EU flag flutter in the wind as Chancellor Angela Merkel meets China's Vice-President Xi Jinping prior to talks at the chancellery in Berlin October 12, 2009. Merkel and Xi are due to open the Frankfurt Book Fair, the world's largest, with China this year's guest of honour, on October 13. Merkel said she would press Chinese officials on human rights, ahead of talks with the country's possible next president and this week's Frankfurt Book Fair. AFP PHOTO JOHN MACDOUGALL (Photo credit should read JOHN MACDOUGALL/AFP/Getty Images)©Getty

The Chinese (C) and the EU flag flutter in the wind as Chancellor Angela Merkel meets China’s Vice-President Xi Jinping prior to talks at the chancellery in Berlin October 12, 2009. Merkel and Xi are due to open the Frankfurt Book Fair, the world’s largest, with China this year’s guest of honour, on October 13. Merkel said she would press Chinese officials on human rights, ahead of talks with the country’s possible next president and this week’s Frankfurt Book Fair. AFP PHOTO JOHN MACDOUGALL (Photo credit should read JOHN MACDOUGALL/AFP/Getty Images)

The largest European business lobby in China warned on Thursday that the country’s market access barriers are “politically unsustainable” as Chinese investment continues to flood into the EU.

“There is a small, rocky pathway to China [for foreign investors] and an autobahn from China to Europe,” said Joerg Wuttke, head of the European Chamber of Commerce in China. “The increasing wave of Chinese investment into Europe, while European investment in China drops, highlights the lack of reciprocal market access.”

    In an annual position paper on Chinese operating conditions for its member companies, the chamber noted that Chinese investment into Europe surged 44 per cent in 2015 to €20bn. That total has already been exceeded this year with 119 completed or pending Chinese investments, including ChemChina’s $44bn offer for Syngenta of Switzerland.

    The chamber cited Fosun International’s acquisition of Hauck & Aufhauser, a German private bank, ChemChina’s €7.3bn purchase of Italian tyre group Pirelli and the sale of German robotics maker Kuka to Midea as evidence of China’s “unequal investment landscape”.

    “It is almost impossible to imagine in the current climate that a European company would be permitted to make a significant investment in an equally prominent Chinese company with advanced technological capabilities,” the chamber said.

    When the Australian government recently rejected a Chinese bid for its electricity grid on national security grounds, some foreign executives noted a similar sale in China to overseas investors would not be permitted by Beijing.

    The Chinese government has not significantly reduced restrictions on foreign investors since it joined the World Trade Organization 15 years ago. Beijing is negotiating wide-ranging bilateral trade agreements with both the EU and US, but hopes that this could lead to a dramatic liberalisation are fading as investors question the Chinese government’s willingness to implement bold economic reforms.

    “It is no longer clear that reform is still a top priority,” Mr Wuttke said, adding that “the current lack of reciprocity in market access is politically unsustainable”.

    Many Chinese investments in Europe, such as Geely’s acquisition of Swedish carmaker Volvo in 2010, have been successful, saving thousands of local jobs.

    But as attention has turned this year to pressure on EU and US steel mills from cheap Chinese exports, western governments’ patience with the barriers confronting foreign investors in China is wearing thin.

    The issue dominated a Sino-US cabinet summit in June and is likely to feature again when Chinese President Xi Jinping hosts his global peers in a G20 meeting this weekend in Hangzhou.

    “Our politicians react to job losses,” Mr Wuttke warned. “This [issue] will not go away.”

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