EU companies eye more on China market, express old concerns

EU businesses are doing well in China but continue complaining about the legislation transparency and IPR here. They also expect more open market in China.

The 1000-member European Union Chamber of Commerce in China issued its Position Paper 2006/2007 in Beijing on Sept. 5, the 7th edition since it was established six years ago. It has found that 83 percent of the respondents expect to be profitable and only 7 percent expect losses in 2006. Last year 23 percent of the respondents made losses.

China is no longer regarded simply as a manufacturing base for European companies. Thirty percent of companies set up production facilities in China for China market. "It highlights the importance of China's domestic markets and the fact the EU companies are increasingly directly involved in developing China's domestic markets," states the report.

Another notable change is EU companies' geographic distribution. They are shifting to 2nd or even 3rd tier cities of China to seek new markets and cheaper labor supply. In 2005, 57 percent of Chamber members resided in Shanghai, Beijing and Guangzhou, much fewer than the 71 percent in 2004.

That has also been confirmed by the survey result revealed by the Chinese Academy of Social Sciences a few days ago, which lists 20 cities with greatest investment potential for multinationals. More than half of the top 20 cities are in the central or western part of China.

In his presentation at the release conference, Mr. Serge Janssens de Varebeke, Chamber President, said China's WTO accession has supported the country's economic growth and China has successfully implemented the majority of WTO commitments on or ahead of schedule.

EU companies are not worried about the unification of taxation for domestic and foreign companies although the timetable to realize that is not clear. "There is not only risks, there is benefits from the unification", said Ms. Sigrid Dengler, Chairperson of the Finance and Taxation Working Group of the Chamber. She believes the common understanding and implementation of the taxation system will be good to enterprises. But she also hopes that there will be a smooth transition and preferential treatment for R&D activities continue.

However, transparency of legislation remains one of the major obstacles they have met when doing business in China. The problem is they are given too little time to give reply to a draft of a new law and to implement the new law once it takes effect. Another problem is that they have found themselves face different interpretation and implementation measures between the central government and local authorities.

EU companies, once again, as what they did last year, voiced their concern about the IPR protection. They hope more efficient deterrence measures be taken to prevent and penalize IPR infringement.

Mr. Varebeke stressed that their focus in the future would be on the "spirit of the WTO", indicating expectation for more open market. For example, the capital requirement of the incorporation of entities by foreign banks is one of the important issues in their communication with Chinese regulators. And EU companies are sometimes confused by complicated registration procedures.

By People's Daily Online