Guest Say: Opportunities and challenges for European businesses in China
17:37, November 02, 2007
|The European Union and China should "remain open to each other" and should not "fear each other" for the sake of a win-win business situation. Mr. Michael Sullivan, Secretary General of the European Union Chamber of Commerce in China, gave this advice during a video interview with People's Daily Online last week.
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In the interview, Mr. Sullivan offered his perspective on the opportunities and challenges for business in China after China completed its transition into the WTO last year.
Bigger market, more openness
European businesses have been getting much more involved in China's economy since China became a member of the WTO. The European Union Chamber of Commerce had only 51 members in October 2000; but today that number has grown to 1,200 members. They have joined formerly closed or highly-restricted sectors, such as banking and logistics.
There are several forces behind this development. The main reasons, however; are the increasing disposable income of Chinese people and their interest in high quality goods and services as the economy continues to grow. This apparently bodes well both for European businesses in China, which mostly produce for the China market; and for European exporters.
For European businesses which offer environmental services, China's aspiration for a "greener" growth model means more opportunities. China has strict environmental laws and there is concern about the possible transfer of pollution to China – a "world plant" –by foreign investors building production facilities in China. European technologies and management techniques can be useful for tackling the environmental problem at home.
Politically, the country's stability is a "consistent attraction." China will remain stable "at least in the short- and med-term." And there is positive development in legislation. New laws and regulations have been promulgated: the bankruptcy law, the labor contract law, and the latest anti-monopoly law, for example.
The significant economic growth in the less developed inland parts of China – Chongqing, Chengdu, Changsha, Urumqi and Inner Mongolia – harbors new business opportunities for foreign investment. The newly-improved infrastructure and logistics services facilitate production and delivery. In addition, there are preferential policies. Some European companies are already seeking out new possibilities there.
Calling for better administrative and legal environment
For foreign investment, it is the quality of the overall environment, rather than preferential policies, which makes the difference. In fact, coastal cities that rate higher in transparency and government efficiency are still more attractive to foreign investment; even though less developed areas offer preferential treatment to foreign investors.
The enforcement of laws at the local level is the biggest concern with the legal environment.
On one hand, foreign companies in China must obey Chinese laws. On the other hand, strong law enforcement must be applied on all companies – be they Chinese or foreign-owned. Take the environmental law as an example. In some cases, penalties do not effectively punish and deter misconduct that seriously threatens ecological balance and people's lives.
The general language of the laws also needs to be addressed. European businesses still have no idea how laws will be implemented as long as some legal concepts remain undefined: for example, public interests and hi-tech companies.
European companies hope that the Chinese market will be more open to them. They look forward to improvements on various "little things that add up," such as simplified certification and licensing procedures. It is particularly difficult for small- and medium-sized enterprises (SMEs) to go through all these procedures.
Mr. Sullivan said the "instinct to protect" a country's own industry is understandable; but he did not think it was beneficial to its economy and consumers. He hoped that the number of monopolies by state-owned Chinese enterprises would decrease in the years to come after the country adopted its anti-monopoly law. He said there were concerns about protectionist voices from the European Union, North America and China.
Foreign investment will grow as long as China remains stable; develops its economy; and improves its infrastructure and legislation. However, it is not advisable for China to embrace an "everything-is-fine" attitude.
By People's Daily Online