Speech Delivered by President Mats Harborn at the Dialogue with French Enterprises in China Go back »
2018-11-22 | All chapters
The European Chamber was invited to participate in a roundtable with French enterprises in China organised by the CCPIT and CCOIC and hosted by Vice Premier Hu Chunhua on 21st November. During the frank and open dialogue that took place, Vice Premier Hu recognised the issues raised by attendees, and reiterated China’s commitment to reform and opening up, and creating a level playing field for businesses operating in China. The vice premier also made special mention of the quality of the European Chamber’s working groups and the position papers that they produce.
Below is the speech delivered by President Mats Harborn at the Dialogue. The original speech was in Chinese.
Dear Vice Premier Hu Chunhua, distinguished guests, ladies and gentlemen,
Good afternoon.
It is my great pleasure to be able to address you on behalf of the European Union Chamber of Commerce in China this afternoon.
First of all, I’d like to congratulate China in celebrating the 40th anniversary of reform and opening up. I myself have been a witness to the incredible changes in China since I first came here in 1982. I have worked in China for 36 years and can personally say that we European companies have been happy to play a role in these past four decades of economic development and we are all dedicated to the success of China. Since the establishment of the European Chamber in 2000, we have published our annual Position Paper among several other publications. On 18th September this year, we published our latest position paper, which contained 828 recommendations that we hope can be used by the government to improve China’s business environment.
Today I would like to address three main issues:
Firstly, that China needs to treat all market players equally. European firms continue to demand equal access to the Chinese market. President Xi has reiterated at many occasions that all businesses registered in China will be treated equally and we hope this goal can be achieved as soon as possible. Therefore, instead of having a separate foreign investment law, China should have all companies in China register equally under the Company Law.
Secondly, we fully support the WTO as the main multilateral rules-based dispute resolution mechanism and we appreciate China’s commitment to upgrading the WTO through the working group created with the EU at the 2018 EU-China Summit. In this context we think that certain concrete actions by China will show that it is fully committed to the survival of the WTO. For example, unfair procurement systems were identified as a significant challenge by many sectors. Speeding up China’s accession to the GPA will improve this situation. We are glad to see that at the Bo’ao Forum in April this year, Chinese leadership committed to rapid pursuit of accession to the GPA. As it stands, public procurement in China prefers indigenous products, particularly in the healthcare sector, which creates unfair competition.
Thirdly, while I may have been expected to talk at length about the other traditional concerns of the business community: market access, a level playing field and resolving the tension between the state-owned economy and the private sector, I would instead like to take this opportunity to focus on regulation and compliance from the point of view of stimulating high quality and sustainable growth.
The starting point for this discussion is inbound investment. We continue to wonder why European FDI into China has routinely fluctuated around 10 billion USD per year, while at the same time European FDI into the US economy has stood above 100 billion USD for the last five years. One explanation is that China still lacks the economic width and depth found in the US. In other words, there are probably hundreds of areas of the economy that are still not serving China and its citizens that, if opened up, would provide engines of new high quality and sustainable growth.
Opening new areas is often done through regulation and its strict enforcement. I would like to give one example that would create dynamic growth of the economy and also attract much greater foreign direct investment.
We fully understand and support that China wants to leapfrog technological development though industrial policies such as CM2025. Meanwhile a solid foundation needs to be laid with skilled professionals in all areas of the economy. China can create a new level of service industry by writing and enforcing modern, strict regulations and standards in areas such as plumbing, electricity, and carpentry just to give some examples. As foreigners, our observation is that China relies on generalist handymen who often lack the appropriate tools to perform a satisfactory job. Modern standards and regulation and its strict enforcement will force these professions to provide top-quality services while also creating new middle-class jobs.
This is only one example of how to generate trillions of RMB in annual GDP while also fulfilling critical needs for society through regulation. There are hundreds of other areas where economic growth can be unlocked.
Finally, I’d like to touch upon the rule of law. This is the foundation of a modern market economy with a level playing field. However, rules and regulations need to be rationally designed and fully understood by all stakeholder in order to make them enforceable. This can only be achieved through early multi-stakeholder consultations. In 2017 the Chamber submitted over 90 pieces of legislative comments to Chinese counterparts and this year it will be even more. Issues that we have engaged on include new cosmetics ingredients, alternatives to animal testing and cumbersome and slow certification and homologation processes for pharmaceuticals and healthcare equipment.
Another example of how regulation impacts business is China’s cybersecurity law. The law and it’s supplementary policies need to be applied in such a way that they ensure both national security needs while simultaneously not hindering business development and innovation. Today there is a strong feeling among companies that cyber related legislation restricts these aspects. Similar regulatory weaknesses can be found in many sectors, such as automotive, agriculture, food and energy sectors mentioned today.
The other aspect of Rule of law is compliance. In this year’s BCS we noted with satisfaction that environmental laws are applied more equally among all market players than ever before. This is very good news as it both contributes to a more level playing field and creates better quality of life for the citizens of China. Strict compliance also has several other positive side effects. It forces supply chains to be efficient as they need to mitigate the increased initial cost of compliance and it also stimulates innovation to stay competitive while remaining compliant. Actually, this is a stronger driver of innovation than any industrial policy.
Speaking of the rule of law, we are also very encouraged by the 2018 State Council Document No.19, which explicitly prohibits forced technological transfer by officials at any level of government. Last year, 19% of our members reported that they felt compelled to transfer technology as a condition for market access. We expect that this important principle will be fully enforced and hope to see the number of members reporting this as an issue drop to zero.
We value the meeting opportunity today very much and hope to have more such meetings in the future. Specifically, as long-term partners with China the European Chamber and our members hope for annual closed-door meetings with senior leadership to provide constructive feedback on how to improve China’s business environment for the mutual benefit of all. After all, our members are in China, for China.
By doing so, we are sure that the right system can be established to ensure that future European investment into China will no longer hover around 10 billion USD per year, but instead reflect the size of China’s GDP.
Thank you.