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American firms say Chinese protectionism rising

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JOE McDONALD
April 26, 2011
— Chinese protectionism has increased since the 2008 global crisis and U.S. companies are being hurt by Beijing's policies aimed at developing its technology industries, a business group said Tuesday.

A report by the American Chamber of Commerce in China adds to mounting complaints that Beijing is violating the spirit of its free-trade pledges by limiting market access and trying to shield its fledgling technology industries from competition.


Beijing has alarmed foreign companies by pushing them to hand over technology in fields from high-speed rail and renewable energy to mobile phones. The communist government says it will favor Chinese suppliers when it purchases computers and other technology and has ordered banks and other companies to limit use of foreign data security products.


The report comes ahead of next month's meeting of the U.S.-China Strategic and Economic Dialogue, a Cabinet-level gathering aimed at defusing trade tensions and promoting cooperation in health, the environment and other areas. The American chamber said a group of members will visit Washington next week to give copies of its report to U.S. officials.


Access to the world's second-largest economy is especially sensitive at a time when other governments are trying to create jobs following the global crisis.


The American chamber said 26 percent of its member companies responding to a survey said they are being hurt by China's "indigenous innovation" policies. It said more companies expect to be hurt by them in the future.


"Protectionism increased during and following the global downturn. Key manufacturing sectors remain only partially open and services are especially restricted," the report said.


Despite three decades of reform, China's heavily regulated economy is dominated by state-owned companies. Beijing is trying to build up "national champions" in a range of industries from banking to oil to shipping, prompting complaints it is violating the spirit of pledges it made when it joined the World Trade Organization in 2001.


A European group, the European Union Chamber of Commerce in China, complained in a report last week that foreign companies are treated unfairly in government procurement, a market worth an estimated 6.8 trillion yuan ($1 trillion) a year.


In the American chamber survey, over half of companies responding said foreign enterprises cannot obtain the same licenses as domestic competitors or the process is more complicated or takes longer.


Companies said market conditions had improved due to China's quick rebound from the global crisis. Some 85 percent of respondents reported higher revenues in 2010 and 78 percent said they were profitable.


The report reflected complaints that foreign-owned companies in China have seen less benefit from its rebound, due in part to Beijing's efforts to support domestic industries by reserving fast-growing market segments for them.


While foreign companies in some industries are growing quickly, in others "you do still see that the growth of foreign companies is restricted by the regulatory environment," said the chamber's president, Christian Murck, at a news conference.


The chamber said banking, insurance and finance are heavily restricted, and foreign companies are allowed little access.


Foreign life insurance companies were reducing their investments in China due to their inability to obtain licenses required to expand to the size necessary to be efficient and profitable, said a chamber board member, Matthew Estes.


Murck said, however, he did not expect tensions over China's industrial policy to result in formal complaints against Beijing in the World Trade Organization by Washington and other trading partners.


"It can't be solved by simply referring it to the WTO," he said. "It has to be negotiated, and it has to be negotiated in a spirit of contributing to China's development of a sustainable innovation within the economy."



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