Beijing, 18 March 2016 – The European Chamber recognises China’s aspirational goals to increase its capacity for innovation, reform SOEs, address overcapacity and develop its environmental technology industry, as set out in the 13th Five Year Plan. However, it would be detrimental to China if the ambitious growth targets that have been set by the National People’s Congress were achieved at the expense of the reform agenda.

The plan to develop Chinese industries through innovation is welcomed by the Chamber. China can effectively strengthen its capacity in this respect by removing the barriers that currently prevent foreign-invested enterprises from fully participating in its market; more competition will produce more innovation. Ultimately, the Made in China 2025 initiative will only succeed if markets are permitted to operate freely. Stronger protection for intellectual property rights and greater respect for trade secrets of firms operating in China are further examples of measures that will support innovation.

The adaptation of an import policy that is driven more by market forces is also a positive move. However, European Chamber President Wuttke stated: “This should not be limited to advanced technologies and equipment, key spare parts and components, as well as the raw materials that China needs. It should involve pursuing a genuine market opening based on customers’ demands, not policy planning.”

Financial support from the government for state-owned enterprises has also enabled uncompetitive companies to continue to produce low-quality goods for which there is no demand. Without structural reforms, accommodative monetary and fiscal policies will therefore further aggravate China’s current problems with industrial overcapacity, as explained in the European Chamber’s recent report on this topic.

China should not undervalue the potential of its environmental sector. It can develop a stronger industry by allowing European companies with advanced expertise and technologies to operate freely. European companies are ready and able to help improve quality of life for all of China’s citizens. Unfortunately, government measures that disrupt market competition, such as the promotion of the Catalogue of Major Domestic Environmental Technologies, can prevent the best solutions from taking hold in China.

Lastly, the pledge to continue to relax market access restrictions on investment, open up the services sector and the simplification of procedures for establishing overseas-funded enterprises is also vital as China negotiates an investment agreement with the European Union. President Wuttke stated: “European business hopes that a robust market-opening pledge and a timely conclusion to successful negotiations will enable them to make major investments in China. We want to see China succeed.”