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July 27, 2017

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EU trade voice: ‘We want China to succeed’

THE European Union Chamber of Commerce in China is recognized as the official voice of European companies doing business here.

Founded in 2000, the chamber now has more than 1,600 members in seven chapters in nine cities. The EU is China’s biggest trade partner, accounting for 14.8 percent of exports and imports.

The chamber’s stated goal is to “seek greater market access and improved operating conditions for European companies in China.”

Shanghai Daily sat down with Mats Harborn, president of the European Chamber, to discuss the domestic regulatory environment and the progress of European companies doing business in China.

Harborn, elected to the post in May, has more than 30 years’ experience working in China.

Q: What can be done to further enhance China-EU cooperation?

A: The US retreat from various responsibilities, including globalization, free trade and the climate treaty, makes it more important than ever for Europe and China to cooperate.

Last year, Chinese investment in Europe was four times greater than European investment in China. It’s a sign that we need to achieve a more balanced relationship, with companies from both sides tapping opportunities in the other’s market. It’s important to have a Comprehensive Agreement on Investment to protect the interests of both sides. We hope such an agreement will be the start of a true reciprocal relationship between European and Chinese industry.

The time is ripe for concluding the agreement because Chinese companies, especially those in the private sector, are very competitive and a further opening-up of the market would foster even stronger Chinese companies. We know that the last round of discussions among policymakers on the agreement was quite successful, and we hope it can be concluded within a year.

Q: The Business Confidence Survey 2017 recently published by the European Chamber showed that an increasing number of European companies reported better profits in China last year. Do you think that trend is sustainable?

A: European companies are used to working in tough environments, and they are quick to adapt. They have learned for centuries that if they don’t match cost with income, no one will bail them out.

When the effects of stimulus packages came down after the 2008 financial crisis, European companies were less optimistic about the future and initiated cost alterations so they could maintain high performance.

In 2016, China injected various stimulus into the economy. We still don’t know whether the ensuing wave of demand is sustainable. Our next survey in 2018 may tell us a lot about where the economy is going.

Q: What’s your greatest concern in terms of the present Chinese regulatory framework?

A: The most important is a level playing field for domestic and foreign companies to compete on equal terms. For that to happen, we need to play according to the same rules. The creation of new rules has to be done in partnership with all stakeholders: the government, industry, regulators, academia and nongovernmental organizations. All of them need to be involved in making rules conducive to a level playing field. Once the rules and regulations are in place they have to be enforced. When that happens, companies won’t have to be innovative in circumventing regulation, but rather they will be innovative in creating market value and customer value. That is the real driver of innovation in society. The key role of government is to coordinate opinions on rules and regulations, and then codify and enforce them.

Q: How do you manage to maintain such a good relationship with the Chinese government when the chamber is sometimes very critical and outspoken about the domestic regulatory environment?

A: As a European advocacy organization, we mainly have to be very constructive. In our daily work with various Chinese counterparts, we have very constructive relationships, which are appreciated by both sides. When it comes to particular issues where we don’t feel we are getting a response, we sometimes need to give issues high profile through the media. Sometimes that can be perceived as being very critical. We have been critical as friends, not enemies. However, I think it’s important to note that whatever the chamber does, we do it out of the belief that we want China to succeed. We want to be part of China’s success.

Q: The European Chamber made headlines earlier this year by voicing problems companies were having in cross-border payments under China’s measures to control capital outflows. What’s the story behind that?

A: For many of our member companies, changes in regulations on the flow of payments out of China hit the very core of their businesses. It hit predictability. If shareholders of companies feel that repatriation of profits out of China is restricted, it hurts investment confidence and that’s very dangerous.

Pan Gongsheng, director of the State Administration of Foreign Exchange, was very constructive and he came back to us and said he heard our concerns. He told us that tighter inspection on money transfers out of China was not in any way directed toward foreign enterprises, and he asked us to report to him if we found anomalies in the way those regulations were enforced around China or if any of our member companies were encountering major problems.

I think government officials like Pan take our concerns in the right way. We understand that the Chinese government has its own points, but we should keep on communicating so that no unnecessary misunderstandings arise. Actually, most of the time, the Chinese government is very constructive in its responses to the chamber.

Q: The European Chamber will launch its Sustainable Business Awards this year to recognize corporate best practices in innovation, sustainability and responsibility. How do you see European companies contributing to sustainability and China’s economic restructuring?

A: Most European companies come to China with strong values related to the whole process of producing goods and services. Quality itself is a driver of sustainability because you use fewer resources. Efficiency in the use of energy leads to commercial efficiency by reducing operating costs. The right indoor climate raises the productivity of the workers. By coming to China with the right values about daily operations, European companies can show how sustainability is important from a commercial point of view.


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