euchamberchina.jpgThe lack of adequate IPR protection and the leakage of confidential information are hindering technology transfer to China and souring trade relations with European businesses.

So says the European Union Chamber of Commerce in China in the latest edition of its annual position paper on EU-China trade relations.

The paper lists a litany of issues that obstruct free trade, many of which will be well known to any western business that has been in China for any time.

The European Chamber bemoans that equal treatment for domestic and foreign companies is “conspicuously absent” in China's public procurement process. It argues that the 50:50 joint venture requirement that helped China get started on its economic development has passed its sell-by date and is now stifling foreign companies ambitions in China.

The paper touches on a familiar complaint among foreign businesses, namely that the enforcement of regulations on Chinese firms is often weaker than that on foreign firms, and the secretive way in which regulations are drafted seems designed to catch western businesses off guard. Consultation procedures are short, typically limited to selected persons or groups and characterised by a”disturbing lack of transparency”.

In some sectors, China's technical regulations and certification procedures are being used to limit market access, and in certain cases to push foreign-invested companies out of certain markets altogether.

The services sector continues to be tough for foreign businesses to penetrate because of a “noticeable lack of reform and opening up”.

Little of this is new, of course, but the European Chamber says that European businesses have observed a slowdown in the pace of reforms over the past 12 months, with some sectors reporting that the situation has actually gotten worse as industrial-policy interventions and foreign investment restrictions have increased.

But despite the hurdles, European businesses still rush to invest in China. So should China care?

The European Chamber makes the point that while China is important to the EU, the EU is a much more significant market for China. EU exports to China represent just 0.7% of EU GDP but China's exports to the EU represent 7% of China's GDP.

In 2008, about 20% of China's exports went to the EU, compared to 17% to the US and 9% to Japan. The chamber of commerce estimates that about 40% of technology transfers introduced to China through imports and investments originate in the EU.

The paper argues that further opening up and fundamental reforms are needed more than ever, not only to maintain the attractiveness of China as an investment destination for European businesses, but also to sooth ongoing trade fictions between Europe and China.

The EU is currently considering extending existing anti-dumping duties on Made-in-China shoes to protect European shoe manufacturers.

More on the position paper here

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