Returning the favour, China is accused by the EU of setting up all sorts of trade and non-trade barriers to the entry of foreign firms in China. Aside from the ballooning bilateral deficit between the EU and China, concern is being raised over foreign takeovers of Chinese firms being disallowed in several instances including some mentioned below. The EU argues that while its firms are relatively open to Chinese investment, the converse does not hold true:
A senior Chinese official criticised the EU on Tuesday for resorting to protectionism to keep competitive imports from China out of Europe, as European business representatives working in China gave warning of rising economic nationalism. Cheng Yongru, a senior official at the Chinese ministry of commerce, attacked the European Union for its use of “anti-dumping” duties – taxes levied on imports it deems to be priced unfairly low.
The use of anti-dumping duties by the EU and some other large trading partners, such as the US, has been rising over the past year, though still remains low by historical standards. “The trend of trade protectionism in the European Union is very strong. EU companies should adjust their mindsets to adapt to the globalisation trend,” said Mr Cheng.
In a report released by the European Union Chamber of Commerce in China, European companies said they remained “generally optimistic” about their businesses in the country, but complained of a lack of market access, poor transparency and inadequate protection of intellectual property rights.
“Economic nationalism basically shows up in protectionism in China,” said Joerg Wuttke, president of the European Chamber. He said that in China, European and other foreign companies were often excluded from government procurement contracts and that major acquisitions by foreign businesses were “very difficult”, despite the ease with which Chinese companies were able to acquire companies in Europe. He highlighted the steel and automobiles sectors as examples.
The European Chamber is closely following Coca-Cola’s $2.4bn (€1.7bn, £1.35bn) bid to buy Huiyuan, China’s biggest juice manufacturer. If the deal – which was announced last week – receives government approval, it will be the biggest foreign takeover. The bid has stirred up strong nationalist sentiment among Chinese internet discussion group users, who warn of foreign domination and accuse Huiyuan’s owners of being “country-selling thieves”.
Huiyuan’s chairman said he would be happy whatever the outcome because if the deal were rejected by the government it would show how valuable the company was to the nation and many more Chinese would drink its products for patriotic reasons.
The European Chamber’s report estimated non-tariff barriers erected by the Chinese government cost EU operators €21.4bn ($30.2bn, £17.1bn) in 2006 in lost business opportunities and pointed to a growing perception in Europe that China did not always trade fairly. European exports to China grew 12 per cent last year to €72bn, but China’s exports to Europe rose 18 per cent to hit €230bn, accounting for 20 per cent of all Chinese exports.
● The failed foreign takeovers [two cases]
Carlyle/Xugong
Carlyle Group, the US private equity firm, admitted defeat in July after three years of political opposition to its bid to buy China’s biggest construction machinery company. In 2005, Carlyle agreed to buy an 85 per cent stake in Xugong Group Construction Machinery for $375m. However, the government’s refusal to approve the deal turned it into China’s longest-running cross-border corporate saga.
Danone/Wahaha
Nationalist rhetoric has also been a key factor in a heated legal battle between Danone, the French food group, and Wahaha, its Chinese joint venture partner. The Chinese founder of Wahaha has framed himself as a patriot defending his nation’s honour from rapacious foreign invaders. [Those damn gweilo!] Danone accuses him of setting up copycat operations outside its joint ventures to sell competing Wahaha-branded products.