European and US companies voiced bearish prospects and felt unwelcome in the Chinese investment environment amid the slowing growth of the world’s second-largest economy.
Pessimism among European companies about their prospects in China has hit an all-time high, a lobby group said yesterday, saying the country’s slowing growth has been accompanied by an “increasingly hostile” business environment.
Fifty-six percent of European firms polled by the European Chamber of Commerce in China said they are finding it more difficult to do business in the world’s second-largest economy, a five-point increase from a year ago, the group said in its annual Business Confidence Survey.
Nearly one-third of the firms said they were bearish about their profitability in China, the highest rate ever and up eight points from last year’s numbers, it said.
China’s economy grew 6.9 percent last year, the slowest in a quarter of a century, and the change has had an outsized effect on European companies, the report said, adding that the business environment has become “increasingly hostile” as expansion slows.
The changes contradict years of promises from Beijing to reduce barriers, it said, adding that European firms’ “disillusionment in China’s reform agenda” has “deepened.”
“After years of speaking of a level playing field, many of us don’t see any change and think it’s still rhetoric,” chamber president Joerg Wuttke told reporters ahead of the report’s release.
Looking ahead, more than 40 percent of respondents said they might have to cut costs in the country through methods including layoffs, while 11 percent said they have made plans to shift investment to other markets, the report said.
Nearly 60 percent of respondents complained that the recent tightening of Internet controls has negatively impacted their business, a 17-point jump from last year, it said.
The country’s censors have increased their already tight controls on access to the Web through a series of technical measures that not only make it tougher to access information, but can also significantly slow down access speeds.
Another significant difficulty was new national security-related legislation, with 40 percent of respondents saying that they felt the laws discriminated against them.
One particular point of concern was a sweeping new regulation on foreign nongovernmental organizations that would restrict the ability of groups, potentially including the chamber itself, to operate in the country.
Surveying the trends, “it often seems that Beijing is moving in the opposite direction,” of reforms, the report said.
As well as European companies, US firms also feel increasingly unwelcome in China, top US officials said yesterday, as disagreements overshadowed an annual dialogue in Beijing.
US companies are “questioning whether they are welcome in China,” US Secretary of the Treasury Jack Lew told a meeting of CEOs on the sidelines of the US-China Strategic and Economic Dialogue.
“Concerns about the business climate have grown in recent years,” he added.
US Secretary of State John Kerry urged Beijing to “get the barriers out of the way” of companies, adding that the two countries have yet to resolve concerns on intellectual property and clarify “the rules of the road.”
“As every businessperson at this table knows, certainty, clarity, even-handedness ... and an equal application of the laws to everybody is critical to the confidence of the marketplace,” he said.
He added that the new law on foreign nongovernmental organizations set to go into effect next year would seriously curtail their ability to work in China.
Lew and Kerry made their comments in a meeting with CEOs from US corporations, including metals manufacturer Alcoa Inc, which has accused China of dumping aluminum on world markets.
The group also included executives from China’s Dalian Wanda Group Co (萬達集團), whose recent overseas buying spree included the purchase of Hollywood studio Legendary Pictures LLC earlier this year.
Chinese Vice Premier Wang Yang (汪洋) called on companies to seek “win-win results,” while acknowledging that “in a market economy, there will always be competition between our businesses.”
The event came on the second day of the annual dialogue, whose opening was marked by pointed exchanges on China’s alleged overproduction of steel.
Lew said excess capacity had a “distorting and damaging effect” on world markets, but Chinese Minister of Finance Lou Jiwei (樓繼偉) said that the world was merely “pointing a finger” at his country.
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