EU Business Chiefs Attack China Industrial Policy

European Union Chamber of Commerce in China warns foreigners of dangers dealing with protectionist economy.
By Josh Lowe

A report by EU business leaders based in Beijing, released Tuesday, warns of the dangers of trading with China, which it describes as remaining highly protectionist.
The report, published by the European Union Chamber of Commerce in China, criticises China’s industrial policy, referred to as China Manufacturing 2025.
“It seems that the Chinese Government is determined to maintain a prominent role in guiding the economy,” the report states, adding that policy measures it is using to do so are “highly problematic.”
In a warning to foreign businesses, which it says should be treated equally under Chinese law, the report says that “Chinese policies will further skew the competitive landscape in favour of domestic companies.”
The report found that Chinese government contracts are “largely closed to foreign suppliers,” while deals that force foreigners to give up advanced technology are an “increasing requirement” for access to Chinese markets.
Substantial local and central government subsidies are available for favored companies in priority industries, the report says.
Commitments made by Xi Jinping in Davos in January to treat foreign companies more equally and boost foreign investment were welcome, the report said. 

But, it warned: “In the interests of mutual benefit, and to ensure that China reaches its full technological potential, the European Chamber hopes that China follows through on these commitments.”

Rogue Nation

China tech plan threat to foreign firms
By JOE MCDONALD

China is violating its free-trade pledges by pressing foreign makers of electric cars and other goods to share technology under an industry development plan that is likely to shrink access to its markets, a business group said Tuesday.
The report by the European Union Chamber of Commerce adds to mounting complaints Beijing improperly shields its fledgling developers of robotics, software and other technology from competition.
Technology is a growing flashpoint in trade tensions with Washington and Europe, which worry their competitive edge is eroding as Beijing buys or develops skills in semiconductors, renewable energy and other fields.
European companies express frustration Chinese enterprises have been permitted to acquire technology leaders such as German robot maker Kuka while most of China's assets are off-limits to foreign buyers. 

In December, Germany blocked the Chinese purchase of a chipmaker, Aixtron, after Washington objected on security grounds.
The European chamber warned tactics Beijing is using to carry out its "China Manufacturing 2025" initiative might inflame sentiments in Europe and the United States in favor of trade controls.
The plan calls for China to be able to supply its own high-tech components by 2020 and materials by 2025 in 10 industries from information technology and aerospace to pharmaceuticals. 

A broad outline was issued in 2015 and officials have been gradually releasing details.
Suppliers of electric cars and other goods are under pressure to hand over technology in violation of Beijing's World Trade Organization commitments, the European chamber said. 

It said that also contradicts the ruling Communist Party's repeated promises of equal treatment and to give market forces a bigger role in the state-dominated economy.
That strategy "is in fact a large-scale import substitution plan aimed at nationalizing key industries, or at least severely curtailing the position of foreign business in them," the chamber said.
In a possible response to such criticism, China's top economic official, Li Keqiang, promised in a speech Sunday foreign companies would receive "equal treatment" under the manufacturing plan. 

He gave no details.
Foreign suppliers of technology from X-ray scanners to wind turbines to bank security software complain they face growing official obstacles to making sales in China. 

Those range from controls based on national security concerns foreign suppliers say might be exaggerated to procurement rules that encourage hospitals and other customers to favor Chinese suppliers.
Beijing has clashed repeatedly with Washington and Europe since the 1990s over its efforts to induce foreign companies to hand over encryption and other technology.
In November, Chinese legislators approved a cybersecurity law business groups warned would hamper access to technology markets. 

They said a provision requiring security technology to be "secure and controllable" might require providers to disclose how products work, raising the risk trade secrets might be leaked.
In electric cars, where Beijing sees major opportunities, the manufacturing plan says two of the top 10 global brands by 2025 should be Chinese, the European chamber said. 

It said that rules out joint ventures created by foreign companies with Chinese partners.
The chamber appealed to Chinese leaders to discard quotas and other controls and focus instead on encouraging basic research and improving their manufacturing base.
"Perfecting the market would do far more to ensure that China reaches its full potential for economic development and innovation than more old-school, expensive industrial planning ever could," the chamber said.