There’s an excellent report out today about doing business in China from the European Union Chamber of Commerce (EUCCC).
It runs to 600 pages, in both English and Chinese, and includes some microscopic details about blatant government interference, the selective enforcement of regulations against foreign companies, the total lack of transparency or explanation, and China’s failure to live up to its WTO obligations.
Anyone who does business in China will recognize the truth of the examples it cites. I’ll list just a few which I have picked at random by leafing through the tome.
1. Seven years after the WTO, Amadeus, the Spanish travel booking system, has still not been given any access to the Chinese computerised travel system, so it cannot issue tickets or reservations inside China.
2. Since January, all burners used in water-heating boilers have had to be certified. Not only is the certification ruinously expensive, but there’s only one laboratory in China that does it – and it’s on the premises of a Chinese burner manufacturer.
3. One company, importing pharmaceuticals, had 10pc of its imports removed for sampling and testing in 2008, making it economically pointless to continue the trade.
4. Everyone knows this one – Without notifying the WTO, China has banned Wifi in phones in order to protect and promote its own (pointless) Wapi wireless technology.
5. Foreign companies are banned from the river shipping business, leaving the industry underdeveloped despite its low emissions and efficiency.
6. In the financial sector, there is no coordination between the State Administration of Foreign Exchange and the Chinese banking regulator, both of which have to issue permits for a new financial product. Cue plenty of cases where one says yes but the other says no…
I could go on and on. The European Chamber certainly has. There are over 500 examples of how China could improve, and 52pc of the 1,400 European companies operating on the mainland said the government should work to promote better competition and fewer monopolies.
My question is – is this the best way to tackle the (obvious) problems that businesses face in China? There seem to be two schools of thought about how foreigners and Chinese should interact.
The first is the traditional method of kowtowing to the emperor, sucking up all the unfairness and deciding that as long as there’s money to be made, foreigners should be grateful for whatever scraps they get.
The second method, which is the European Chamber school, is that it is right to hold China to international standards of competition and fairness.
Until now, the view from within Europe has been to allow China to get away with almost any infringement. That view seems to be shifting now towards a more direct engagement. After all, as the EUCCC, China needs Europe more than Europe needs China. The EU is a bigger market for Chinese exports than the US.
But will the new strategy pay off? I guess it depends on how coherent the EU can be in its negotiations. We’ll have to wait and see.