2010/07/21

Foreign execs grow impatient with China - Focus

Foreign execs grow impatient with China - Focus

BEIJING, July 21, 2010 (AFP) - China's growing importance to companies' bottom lines has led foreign firms to complain more openly about what they say are unfair business policies and market restrictions, experts say.

While many top executives express their frustrations anonymously through their chambers of commerce, others from leading US and European firms are openly saying they are unhappy with the investment environment in China.

"These companies have a lot more at stake than they used to when China was an interesting experiment for them," said Patrick Chovanec, a professor at Tsinghua University's school of economics and management in Beijing.

"They can't afford to hope that things will get better -- they need to express their concerns."

Last week, senior officials from German firms BASF and Siemens added their voices to the chorus of complaint over the business climate -- during a meeting attended by Chinese Premier Wen Jiabao and German Chancellor Angela Merkel.

BASF chief executive Jurgen Hambrecht complained that foreign companies were forced to transfer business and technological know-how to their Chinese competitors in exchange for market access, according to the Financial Times.

Siemens chief executive Peter Loescher -- whose company last week signed a deal to create a joint venture with Shanghai Electric Group in the steam and gas turbine power plant market -- said foreign firms "expect to find equal conditions in the fields of public tenders".

Merkel herself prodded China on the issue Friday, saying she hoped that "German enterprises can enjoy the same access to the Chinese market" as Chinese firms do in her country.

Those remarks follow public complaints by other senior executives of foreign companies including General Electric and US Internet giant Google, which was embroiled for months this year in a row with Beijing over censorship.

"I think they are emboldened because they feel now many people are coming out to complain," said Shaun Rein, managing director of China Market Research Group in Shanghai.

GE chief executive Jeffrey Immelt reportedly told a private dinner in Italy that China was becoming more protectionist and that Beijing was hostile towards foreign companies.

The company later objected that the comments had been taken out of context -- after they made headlines around the world. GE then was named as a supplier of the electronic systems for China's first-ever jumbo passenger jet.

Earlier this year, Google effectively shut down its Chinese search engine and rerouted users to a server in Hong Kong after a public spat with Beijing over state censorship and cyberattacks the company said originated in China.

The US web giant has since tweaked the way it rerouted users, in order to gain the renewal of its business licence in China -- a move which underlined the importance of the world's third-largest economy to many foreign companies.

Surveys by the American and European chambers of commerce in recent months also show overseas companies are increasingly unhappy with the way they are treated in China.

American executives reported feeling increasingly unwelcome while European businesses warned their investment in China was not "unconditional", suggesting they would consider pulling out of the country if the situation worsened.

Rein however said he does not believe the investment environment in China is any worse than it was a decade ago -- the market is just far more crucial to the foreign firms present in the world's most populous country.

"It's always been difficult to operate here," Rein said.

"You have always had to transfer technology and have joint ventures, but it is a market that matters now."

At last weekend's meeting with German businesses, Wen rejected suggestions that the Asian giant did not provide a level playing field to foreign investors and insisted overseas businesses were not at a disadvantage.

Rein said he expected the Chinese government to ease restrictions on foreign firms in the next six to 12 months, as they try to walk a fine line between securing foreign investment and avoiding criticism at home.

"I think the government is very sensitive to be seen letting foreign companies making money off poor Chinese," Rein said.

"They need to be protectionist for political reasons."