International business needs more market opening in China

Now that the business year has entered the final quarter of 2017, what is the outlook for international enterprises in China? Many of them are reporting profits and continue to see great potential for business. The Business Confidence Survey 2017 has also shown increased competition from Chinese privately-owned companies as the latter's capacity for innovation increases. Mats Harborn, president of the EU Chamber of Commerce in China, expects China to do more to take away barriers for international companies.

The Business Confidence Survey 2017 brings together the input of over 500 senior representatives of the European Chamber’s member companies to provide an annual overview of their performance and outlook from within the Chinese market. The outlook is generally positive, as revenues and earnings before interest and taxes improved.

Wake-up call for European businesses

The report that was compiled in cooperation with in cooperation with consultancy firm Roland Berger, also includes a wake-up call for European business. Many enterprise leaders feel that competition in China has stiffened. Respondents feel that privately-owned Chinese companies have become a lot more innovative, often in areas that are not over-regulated for domestic firms.

This is not necessarily a disadvantage, says Roland Berger Co-Head for Asia, Denis Depoux. “It should be perceived as an opportunity.” “European Business can be a key contributor to the innovation required from Chinese business to climb up the value chain, and they can also learn from domestic innovation for their own benefit, notably on go-to-market related innovation."

Mixed feelings: barriers

The survey shows that European business in China also have mixed feelings about market-entry problems and regulatory barriers. Half of the EU companies present in China report feeling less welcome compared to when they first entered the market. Over the last four years, more than half have consistently reported that foreign-invested enterprises (FIEs) are treated unfairly compared to domestic Chinese companies. 61% believe that environmental regulations are strongly enforced against foreign companies, while only 14% and 17% report that they are strongly enforced against Chinese privately-owned enterprises (POEs) and Chinese state-owned enterprises (SOEs) respectively.

Not treated fairly

In other words: EU businesses in China don’t feel that they are treated fairly in comparison to local competitors. The survey shows that many EU business leaders in China feel there is a disproportionate enforcement of environmental legislation against foreign-invested enterprises compared to state-owned enterprises and Chinese privately-owned enterprises.

Mats Harborn, president of European Union Chamber of Commerce, makes a clear statement to Club China: “Our member countries don’t see much more market opening, it’s the same level as last year. So clearly more needs to be done. We want to see more market opening in China so that European companies are as welcome to Chinese market as Chinese companies are to the European market,” Harborn states. Although European companies are positive about President Xi’s anti-corruption campaign and the incremental improvements to China’s IPR protection regime. The chamber presidents encourages China to "deepen and speed up reform”. “This should be beneficial also for the Chinese economy."

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