Foreigners doing business in China feel boxed out

[A.V.]

The report on business confidence by the European Union Chamber of Commerce adds weight to a growing chorus of complaints by foreign businesspeople in recent months that the Chinese authorities are increasingly setting rules and standards designed to favor local manufacturers over international competitors.

Though the Chamber's members almost all expect strong growth in the Chinese economy, only one-third of them expect their profits to be good.

That pessimism stems largely from the fact that "nearly 40 percent of our members say the situation in two years will be even less fair than today," said Chamber President Jacques de Boisséson.

"Optimism in the overall economic climate has been dampened dramatically by concerns about regulatory interference and unpredictability in the market," the report said.

"China should not take the presence of European companies and their commitment to China for granted," Mr. de Boisseson said, voicing members' frustration. "They tell us that if things turn sour, China is not necessarily a must for them."

Unwelcoming signs

In March, the American Chamber of Commerce in China also reported growing unease about doing business here, with 38 percent of US firms saying they felt unwelcome, up from 26 percent in 2009.

An international uproar last December forced the government back to the drawing board with its Indigenous Innovation Product Accreditation Program, seen as a bid to cut foreign companies out of the official procurement market. But the plan is still in the works "and we will have to see in practice how it works," says one European diplomat warily.

Recent experience in such promising sectors as renewable energy is not encouraging. Foreign wind-turbine manufacturers in China have not won a single tender to build a wind farm here since 2005. They are handicapped, EU Chamber officials say, by requirements such as one demanding that bidders on projects have a minimum production capacity 30 percent higher than the largest currently operating foreign-owned maker of turbines. That condition makes a winning bid virtually impossible.

"There is nothing official to keep foreigners out of the market, but you just have to look at the results of the tenders to know what the policy is," says the diplomat.

Promoting home-grown technology

China's ambition to replace key foreign technology with home-grown or home-adapted versions within a decade has led it to place a host of restrictions on foreign firms, executives complain, ranging from mandatory technology transfers to local content requirements. And government efforts to boost local entrepreneurs over foreign competitors include uneven application of the law, they say.

EU firms surveyed complained, for example, that they have to comply with environmental regulations that their Chinese counterparts ignore with impunity. Forty-seven percent said they experience "strong" enforcement of such regulations; only 7 percent felt that Chinese firms were subjected to that level of implementation.

De Boisséson said he took heart from recent reassurances by Prime Minister Wen Jiabao, at a meeting with top European businessmen, that their investments were welcome and would be treated the same as Chinese companies.

"We look forward to the premier's words being translated into deeds," he said.

whats the situation like in reality needs an analysis aswell comparing this with a free market like india how does it match up


http://www.csmonitor.com/World/Asia...doing-business-in-China-feel-boxed-out-report

 

[SHASH2K2]

It looks like a good news for us. Loss of China will be India's gain. I am sure many International manufacturers will move to free economy like India.Moreover USA has already started to move out of China .

 

[badguy2000]

those sweat-suckers should be boxed out.....

 

[SHASH2K2]

China's Trade Minister, on a visit to India in the early 1990s, said: "We have come to India to see what China would become after 15-20 years." When asked to elaborate, he explained that his country wanted to see what kind of "chaos" China would face in future.

One thing the Chinese leadership dreads is chaos or instability. Their regimented political system does not quite know how to handle dissent. Meanwhile, there are indications that some kind of chaos has finally arrived on China's economic landscape.

UNREST IN CHINA

After a strike in China's Honda Motor — an unprecedented incident in a big foreign firm in China — the company was forced to offer a 24 per cent pay hike to its workers.

There has also been a furore over the reported suicides by at least 10 workers so far this year in Foxconn Technology Group. This is a Taiwanese company in China, which is the world's largest contract manufacturer of electronics components, supplying to global giants such as Apple and Hewlett-Packard.

Social activists in China said that these suicides were primarily due to very stressful working conditions, including long hours of compulsory overtime and low wages. After this bad publicity, Foxconn has granted a 30 per cent increase in wages.

Such labour conditions prevail in many factories in China owned by MNCs, which contribute significantly to China's miraculous export-driven growth story. Increasingly, the labour practices of such companies are coming under the scanner; this is on top of the huge environmental damage that widespread industrialisation is causing in China. So far, companies (both domestic and foreign) in China have benefited from the availability of a huge army of surplus, disciplined labour at low wages; this seems to be coming to an end. The effects of the one-child policy, together with double-digit growth over nearly three decades, are showing in the form of labour shortage.

The growing influence of social activists, Western media and the Internet over public opinion is having its effect by way of labour trouble, demand for better wages-cum-working conditions, more independent trade unions and more stringent environment standards.

DEMOGRAPHIC DIVIDEND

Factories are relocating to other regions with lower wages and environmental regulations, such as Vietnam, Indonesia and Central Asia.

Do these developments open up new opportunities for India? Optimists point to the huge demographic advantage of India over China. UN estimates indicate that between 2010 and 2020, India will add about 120 million to the working age population, against China's addition of only 19 million.

The difference is even more dramatic if we consider the 2020-30 period. Whereas India will add about 100 million to the working age group, China's working age population will decline by about 62 million people. Clearly, India will not face a general labour shortage for at least the next two decades, while China is already facing a labour constraint which will only become more acute over time.

This implies that India — already labelled as the 'back-office of the world' for its success in IT and IT-enabled services — has the potential to become also the 'factory of the world' over the coming decades.

However, several other things would have to be in place for the potential to become a reality.

First, these additions to the labour force need to be endowed with the required education and skills. Without a vast improvement in the education system, India, too, will face the problem of rapidly rising wages for skilled workers, despite the huge addition to the working age population.

Second, in the absence of a social safety net, which provides adequate benefits to the people losing jobs in the declining industries even as new jobs are being created elsewhere, it would be politically difficult to sustain manufacturing-led growth in a parliamentary democracy such as India.

REMOVE BOTTLENECKS

Consequently, we urgently need to have a social security system financed by contributions from the employer, the employee and the government.

A part of the bonanza to be obtained by the government through 3G auctions and PSU sales may be earmarked to finance such a social safety net.

Pessimists would, however, point to the much bigger chaos that is Indian democracy. For example, the populism of some coalition partners at the Centre is holding up an eminently sensible land acquisition Bill. The proposed legislation provides that if 75 per cent of landowners agree to voluntarily sell land for a project, the state will have the right to acquire the remaining land.

This would avoid the allegation of forced land acquisition as well as the 'hold-up' problem posed by a few strategically located landowners.

In addition, the sellers of land can be made stakeholders by giving them (or their communities) a share of the future profits of the projects coming up on their lands.

Such moves would facilitate seizing the opportunity that 'chaos' in China is offering us.

http://www.thehindubusinessline.com/2010/06/12/stories/2010061250540600.htm

 

[Daredevil]

I think both foreign companies and China have exploited each other in their brief sojourn of two decades or so. Foreign companies exploited the cheap labor and lesser taxes for manufacturing and thus accruing windfall profits. China has acquired enough capital, infrastructure, know-how from the foreign companies and now they are shutting them out as Chinese can get more profits for themselves. Time for foreign companies to look to other countries and exploit labor there to maintain the profits. Time for both to move on.

 

[LETHALFORCE]

Chinese labor and goods prices no longer remain attractive for foreign companies. This is just simple economics money will go where cost of goods and labor are lower. The Chinese growth is it's own worst enemy, and these are classic signs of an economy that has peeked.

 

[badguy2000]

Chinese labor and goods prices no longer remain attractive for foreign companies. This is just simple economics money will go where cost of goods and labor are lower. The Chinese growth is it's own worst enemy, and these are classic signs of an economy that has peeked.

hehe, west guys are not born as wall street fat cats and chinese are not born as workers in sweat plants.

if lazy west guys can live a cozy life by exploiting poorer countires after their low-tech industries move out, why can't CHinese?

what a one-way head!

One day, Chinese may dirve yankees into sweat plant.,can't they..hahah

 

[thakur_ritesh]

it was never wrong to look inwards, be a protectionist and project your own people, we in india have done it for long and still do it, and seriously had it not been for the constant backing from our government our private sector would not have been where it is today, its just that chinese have learnt the lesson of believing in their own people a little too late in the day something they are trying to correct now.

these overseas MNCs will complain each time they see their interests slightly being harmed but none of the sort happens when they dole out millions if not billions in form of profits from the same market and if they have so much of a problem then they should walk the talk and pretty well walk out of china, but will they do it?

if yes, well there lies our opportunity, all one wants is that our trade bodies publicize all these happenings in the west in their leading dailies and business mags as much as possible and make sure china gets the worst name possible and the liberal minded seated in the west looking for good business opportunities gets dead sure about china returning to bad old days of mao no matter how false a story it might be, to create fear amongst a 1000 all you need to do is kill one of them and all fall in line, and china has done just that with google.

 

[LETHALFORCE]

hehe, west guys are not born as wall street fat cats and chinese are not born as workers in sweat plants.

if lazy west guys can live a cozy life by exploiting poorer countires after their low-tech industries move out, why can't CHinese?

what a one-way head!

why would Chinese get the work if a filipino can do the same work for half the price??

 

[badguy2000]

why would Chinese get the work if a filipino can do the same work for half the price??

hehe, it is so because filipino can not provide necessory infrastructrue,stablity,and industry chains as CHina does.

gap of industrialization and deveopment dicides the gap of income.


guy, you should rethink frist why one yankee street illiteracy guy can earn more than university graduates in most 3rd world countres.before you raise such a stupid question.

 

[LETHALFORCE]

For many industries you don't need infrastructure, the Chinese investment in it's infrastructure will be a huge drain when buisness moves out as it has started doing.

 

[LETHALFORCE]

http://www.fundmymutualfund.com/2010/03/wsj-business-sours-on-china.html

WSJ: Business Sours on China

This
A very interesting headline story in the Wall Street Journal, on how foreign business is increasingly wary in doing business with China. So many cross currents happening here, it is hard to even begin to touch the surface of the topic... but a lot of this should be of no surprise. There has been a reason every foreign investment in China is done by joint venture and since the time frame of foreign executives (especially of the American kind) is very different then the Chinese, what has been a 'win-win' in the near term (10-20 years) is going to potentially create some major stresses down the road. For now, multinationals have been able to shed costs (Western labor) at a rapid clip, creating massive wins for the executive class while (to gain access to the China market) being forced to share know how, technology, and the like. Eventually the Chinese are going to find these Western companies "inconvenient" to keep around....

Many dismiss any threat from this relationship because "the Chinese don't know how to innovate"... what beautiful narcisstic dogma. Give it 2 generations... already we can see on the horizon Chinese cars coming to the US market (3-5 years). Just as Hyundai was laughed at 20 years ago, so will this first wave. But check to see what auto company fared best in the past 3 years. Rinse, wash, repeat across industry after industry... as more and more manufacturing and now research & development centers sprout up across China.

These are long term trends, and on Wall Street if the tree is not directly ahead of us, we could care less. But the greater issues for economies, countries, and our dear multinationals are going to be multi faceted. In the meantime, our pathetic political class - in a move to find a fall guy to distract Americans from their inability to do a darn thing - are now creating a new villian... the Chinese.

* Five senators including Charles Schumer of New York and Lindsey Graham of South Carolina introduced legislation yesterday to make it easier for the U.S. to declare currency misalignments and take corrective action. Even if the bill stalls, it may have "ripple effects" that lead the Treasury Department to declare China a currency manipulator, William Reinsch, president of the National Foreign Trade Council, said.
* "The only way we will change them is by forcing them to change," Schumer said. The yuan is undervalued by as much as 40 percent, which is "blatant protectionism," Bergsten said.

Of course, just as America is neutered in many areas of the Middle East due to its addiction to oil (remember our limp response to $140 oil), it is very similarly neutered in China. Geithner almost caused an international incident in his confirmation meetings when people thought he implied China *might* be manipulating its currency. How can you strike back against your drug dealer? Who would buy all our IOUs?? Oh baby... somewhere Niall Ferguson is smoking a cigar and cackling as he watches this play out. [Aug 30, 2009: Chimerica Headed for Divorce]\

Via WSJ:

* China's relationship with foreign companies is starting to sour, as tougher government policies and intensifying domestic competition combine to make one of the world's most important markets less friendly to multinationals. Interviews with executives, lawyers, and consultants with long experience in China point to developments they say are making it much harder for many foreign companies to succeed. They say the changes suggest Beijing is reassessing China's long-standing emphasis on opening its economy to foreign business—epitomized by the changes it made to join the World Trade Organization in 2001—and tilting toward promoting dominant state companies.
* Technology executives say they are highly concerned about government procurement rules issued late last year that would favor local suppliers who have "indigenous innovation." The rules, if implemented, could limit foreign access to tens of billions of dollars in contracts for computers, telecommunications gear, office equipment and other goods.
* Patent rules imposed Feb. 1 threaten to increase costs in China for foreign innovators in industries such as pharmaceuticals, and let authorities force foreign drug companies to license production to local companies at state-set prices.
* Executives in several industries say the liberalization spurred by China's WTO entry is stalling. Foreign makers of wind turbines and solar panels say they are being shut out of big renewable-energy projects. (even as much of Americ'a stimulus money - i.e. taxpayer money - for renewables is going to China) Regulatory barriers effectively cap participation in insurance: Foreign companies had just 4.7% of China's life-insurance market as of June, and 1% of its property and casualty market, according to PricewaterhouseCoopers.
* Some sectors haven't been significantly hindered. Car makers like Volkswagen AG and General Motors Co. benefited hugely from China's booming market last year. But state-run media have reported government plans to increase domestic brands' share to over 50% of passenger vehicles by 2015, from 44% last year.
* Many foreign executives say they see an upsurge in economic nationalism, accelerated by China's world-beating performance during the recession and a new disdain for Western economic management.
* Signs of nationalism are evident in the grooming of state-owned companies to dominate their industries as "national champions," often at the expense of private Chinese companies as well as foreign firms. From airlines to coal mining to dairy products, government policies are expanding the state's role.
* For many multinationals in China, today's profits follow years of investment, much of it encouraged by government policies designed to lure capital. Now, at the point when their dream of access to a giant market is becoming reality, China is so prosperous that it has less need for foreign funds. (bingo)
* Beijing has long harbored suspicions the West wants to hobble its economic rise. Analysts say that lately, such insecurities have strengthened the hand of leaders who want to limit foreign presence in the economy. While there are still proponents of openness, says Mr. Ross of WilmerHale, "there are louder voices pushing China to be more protectionist and to be more nationalist."

 

[Daredevil]

I think China might suffer in the short term due to flight of capital but in the long term it is for the best of Chinese domestic companies and the chinese people.

 

[LETHALFORCE]

Chinese economy has not reached a point where it can sustain itself domestically, 50% + of Chinese economy is exports. There is also a huge imbalance in wealth between Eastern and Western China and most of the industries are still owned by the communist government in one way or another, as well as a huge real estate bubble that may burst when inflated real estate prices come down to earth.

 

[badguy2000]

For many industries you don't need infrastructure, the Chinese investment in it's infrastructure will be a huge drain when buisness moves out as it has started doing.

haha, I am Chinese bankrisk superviser and I am sure that I can do whatever one yankee bankrisk superviser can do.

However, when I just can earn 1/10 of one Yankee's bankrisk superviser, Yankee's bankrisker supervising jobs can stilll keep their jobs...why?

guy, rethink about it,before you easily blah "why CHina can get the the work while fillipon can do the same job with half salary"
Yankee's

 

[tarunraju]

hehe, it is so because filipino can not provide necessory infrastructrue,stablity,and industry chains as CHina does.

Wrong answer

What makes you think China had all the infrastructure the west had when western companies started outsourcing manufacturing to it? Every new manufacturing destination had to start from scratch, China included. So the Filipinos aren't at any big disadvantage. The amount of capital that goes into setting up fresh infrastructure more than pays for itself, compared to staying on in China with depleting profits.

 

[badguy2000]

Chinese economy has not reached a point where it can sustain itself domestically, 50% + of Chinese economy is exports. There is also a huge imbalance in wealth between Eastern and Western China and most of the industries are still owned by the communist government in one way or another, as well as a huge real estate bubble that may burst when inflated real estate prices come down to earth.

again...."50%"+ comes out again......guy...why you always accept such crappy as a self-evident truth like "1+1=2".

if it were truth, CHinese economy would have collapsed when CHinese export went down 40% last year.

 

[badguy2000]

Wrong answer

What makes you think China had all the infrastructure the west had when western companies started outsourcing manufacturing to it? Every new manufacturing destination had to start from scratch, China included. So the Filipinos aren't at any big disadvantage. The amount of capital that goes into setting up fresh infrastructure more than pays for itself, compared to staying on in China with depleting profits.

haha,guy, even yankees has not the capacity to build a infrastructures as massive and modern as China,let alone filipino.

wall street magic r can not finish infrastructures. only real-materials wealth-creating activities can do.
Today, Chinese infrastructure is almost at par as Yankee's.

In one decade at most, CHina can leave Yankee far behind as for infrastruture.

Fillipino? it is not on the screen of CHina.

 

[SHASH2K2]

those sweat-suckers should be boxed out.....

There was a time when you guys pleaded and begged those sweat suckers to Invest in China because you had no money to invest.Now that you have money they become sweat suckers.
:funny_2:

 

[tarunraju]

haha,guy, even yankees has not the capacity to build a infrastructures as massive and modern as China,let alone filipino.

wall street magic r can not finish infrastructures. only real-materials wealth-creating activities can do.
Today, Chinese infrastructure is almost at par as Yankee's.

In one decade at most, CHina can leave Yankee far behind as for infrastruture.

Fillipino? it is not on the screen of CHina.

Haha guy, Yankees will, and depleting profits will force them to. Profitability is of utmost importance, and if that means relocating manufacturing, so it will be. Like I said the costs of relocation will pay for itself in no time.

The west was able to relocate manufacturing in the last century amidst similar global economic climate (post WWII and in the 80s, when American economy was in the dumps), so American companies can make adjustments in any climate. Staying on in China with depleting profits, and horrible IP protection will make them do that.

And why are you trying to draw a comparison between Chinese and American infrastructure (as in civil infrastructure), what has that got to do with the discussion? America's superior infrastructure to China's as of today is not what is keeping American companies from manufacturing elsewhere. So having better infrastructure won't mean squat unless profitability and IP protection is there.