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Cementing business ties between China and EU

JORG Wuttke, president of the European Union Chamber of Commerce in China, spoke at the monthly meeting held by the German Chamber of Commerce in China in Shanghai last week. Shanghai Daily talked with him about European companies in China as well as China's economic relationship with the EU, especially after the financial crisis.

Q: There are many European companies in China. How are small and medium companies from Europe doing in China, in your opinion, and what is their challenge compared with big companies, those with already established names?

A: I think the actual success stories of European business in China, especially German business, are from small and medium enterprises. Everybody knows Volkswagen, Siemens or BASF and so on. But if you look at studies in the past, the profitability of SMEs is much higher. They have very flexible portfolios and they can react to market conditions very fast.

These are real entrepreneurs in European markets but sometimes they may think: "Oh it's dangerous. Don't go to China since we don't have legal departments like Siemens and other big companies." There are always occasions of failure but I think overall SMEs are doing quite well and now the trick is how to get them to China. They all bring value to China as they bring high technologies to the market and they are normally the ones which have the core components that can help Chinese manufacturers.

I think that there are quite a lot of unknown success stories in China. In big multinational companies you have many layers of decision making process and in an SME normally the core is the chairman or the owner of the business so that they make very fast decisions.

In the European region, the Germans have been the most successful in bringing small businesses to China and they have a well-established chamber system to guide these small business owners here. For Europe the challenge is to copy the German pattern and make them aware of the market conditions and give them advice. That's why Europe is founding an SME center in order to facilitate these things and we hope in that way European small business can have more access to information about China.

Q: Do SMEs face more difficulty if they want to get government approval since they are not that influential compared with big multinationals? How can they solve these problems?

A: SMEs normally don't invest a huge amount of money compared with large enterprises and their need to go to the top of the government is very limited. Their requirements are rather basic. That's why the European and German chambers were formed. They are the ones providing the breeding ground so that SMEs can have a great avenue to have the chamber lobby for them. That's why chambers are very important as platforms to operate.

Q: What opportunities do German or European firms in China have after the stimulus package was unveiled in November? Which sectors will benefit the most?

A: European businesses are certainly going to benefit if they are in the construction business since one-fourth of the package would go to reconstruction in Sichuan Province. For example Lafarge, the French cement company, has a cement factory in the city of Chengdu and they benefit of course. Railways are also a big sector and transmission of power will also see a huge increase.

If the economy picks up not only state-owned enterprises but also foreign business in China will benefit. China has been encouraging residents in rural areas to buy home appliances by giving them vouchers and if companies supply components in motors or refrigerators to the manufacturers they will benefit indirectly. We'll all be better off if the Chinese economy picks up again but most of the beneficiaries are going to be Chinese state-owned enterprises.

Q: Some of the business groups led by Chinese Commerce Minister Chen Deming have already visited Europe to sign contracts with European companies. What do you think is the role of this kind of procurement groups in China's economic relationship with the EU?

A: The delegation led by Chen came just after Premier Wen Jiabao's successful visit to European nations. The ''tour of confidence'' to Europe by Wen was very successful and the visit led by the minister of commerce was a follow-up. It was a gesture and a great effort to get the businesspeople together.

Q: Chinese enterprises are becoming more interested in buying stakes in or acquiring foreign business. There are also cases of China's capital investing in European businesses. What will this bring to European companies as well as Chinese companies amid the financial crisis?

A: Chinese investment in European businesses will certainly bring fresh capital to the market and Europe has been very open concerning this issue.

In a way Europe is far more open than the Chinese market and we welcome this. It's very important that we keep it open. That's also very important to Chinese businesses.

Q: It was revealed at the ongoing Auto Shanghai that Daimler is talking with the Chinese government to attract capital from China Investment Corporation. What's your view on the potential deal and what suggestions do you have for European as well as Chinese firms?

A: Daimler already had two very prominent investors from the Middle East and I think they're very familiar with this kind of operation. I believe this again shows that European business is eager to attract Chinese capital. Generally if some Chinese firms invest in a European company its stock price rises as it's a sign of confidence and it will have greater demand in the Chinese market. Chinese firms should be cautious and careful about the quality of the investment. After the Fortis-Ping'an case they'll certainly learn their lesson.

Any investment in another country is a sign of confidence and that's why Europe really wants China to open to more investment.


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