Wednesday, 20 October, 2021

European businesses urge China to open up

BEIJING: European businesses in China urged the country to steer away from what they see as an “inward” turn of the economy to achieve self-sufficiency, which has impeded their operations and prospects.

China has stepped up control over foreign firms’ supply of technology and components to Chinese clients over national security concerns, according to a report by the European Union Chamber of Commerce in China. That’s driving European businesses to localise development and supply chains and leading to an increasingly difficult business environment, the paper said, report agencies.

Beijing’s focus on building core technologies such as semiconductors domestically as part of its dual-circulation strategy could result in massive mis-allocation of resources, according to the European Chamber, which represents over 1,700 companies operating in China.

A lack of further opening up and structural reform of the economy could also lead to slower innovation and growth, according to the paper, which was released on Thursday.

“It’s a bit more challenging to operate in China than it was two or three years ago,” Joerg Wuttke, president of the chamber, said at a recent press conference. “We have this problem of contradiction between the self-reliance that China is aiming for and the openness that it’s always talking about.”

China released a five-year plan for its economy in March, which placed a top priority on increasing spending on research and development to turn the nation into a tech superpower. The blueprint raises concerns that economic policymaking could be increasingly driven by national security concerns, according to the European Chamber, which laid out some 930 recommendations for the government in the report.

Foreign companies in different industries receive drastically different treatment, according to the report. For example, the government’s policies are favourable for companies in the machinery, chemicals, semiconductors and green energy sectors that have technology needed to upgrade China’s industrial sectors or support its green goals, according to the report.

For consumer goods, the authorities see it as necessary to keep a foreign presence to maintain competition and supply. But companies in network equipment, telecommunications and most things digital are increasingly unwelcome, the European Chamber said.

China’s Cyberspace Administration’s critical information infrastructure regulation released in August on the basis of the cybersecurity law is “having a considerable, negative impact” on European companies, it said.

The regulation requires European telecom equipment and service providers, as well as producers of certain software to undergo a national security review, which involves up to 12 government departments, before they can supply new equipment or services.