EU business group’s SOE criticism biased: analysts

By Li Xuanmin Source:Global Times Published: 2019/9/24 21:58:40

The European Union flags flutter in front of EU headquarters in Brussels, Belgium. Photo: Xinhua

Foreign companies that do business in China should realize that the country's business environment has evolved to be highly competitive and respect corresponding rules, rather than pointing fingers at the process of state-owned enterprise (SOEs) reforms and blaming their failures on competition from SOEs, Chinese analysts said.

The comments came in response to a 29-page position paper issued by the European Union Chamber of Commerce in China (EUCCC) on Tuesday in Beijing, which extensively accused SOEs of "sucking up all the oxygen" and depriving the private sector, including foreign companies, of the fuel needed to propel China's economy.

While acknowledging that China's market continues to open to foreign investment and the business environment has improved in recent years, the report claimed that "these advances have not been enough to offset the resurgence of the state-owned economy… such as the drying up of private-sector financing and flagging national productivity." 

Industry insiders said the report reflects the one-sided view of some European enterprises, which - without a comprehensive and developed view of the steady steps that Beijing has taken to push forward SOE reform and create a level playing field - dream of a regulatory environment that only tilts in their favor.

"When foreign companies entered the Chinese market decades ago, they thrived on minimal competition as well as the government's super-national treatment and tax breaks. Is this what they want to have called 'fair competition' today?" Bai Ming, a research fellow at the Chinese Academy of International Trade and Economic Cooperation, told the Global Times on Tuesday.

"Things are totally different nowadays, and foreign companies need to adapt to a vibrant competitive environment where domestic companies are on the rise and new trends are emerging every day," Feng Liguo, a research fellow at China Minsheng Bank's research center, told the Global Times. 

The EUCCC report said that European businesses are tired of competing on an uneven playing field, especially against SOEs. It identified SOEs as "the structural issue at the core of China's economic woes," and claimed that the failure to deal with it will dampen [European companies'] long-term confidence in the Chinese market.

Feng called on foreign companies to reflect on internal issues instead of blaming SOEs for their shrinking competiveness in China. 

"It's time for foreign companies to wake up, respect the new game-playing rules and rethink their strategies in China," Bai said.

China has pledged to grant all companies equal treatment irrespective of their ownership type. In particular, the country has made many efforts to marketize its SOE sector, ranging from promoting modern enterprise governance to accelerating mixed-ownership reform. 

This is in stark contrast to what was described at the European business lobby group's report, which said that certain SOE reforms were superficial or had even stalled.

Currently, about two-thirds of centrally administrated SOEs have introduced social capital, Wen Jieming, a deputy director of the State-owned Assets Supervision and Administration Commission under the State Council, China's cabinet, said at a press briefing in September. 

At the provincial level, SOEs that have carried out mixed-ownership reform represent 49 percent of the total, according to Wen. 

From 2013 to 2018, more than 70 percent of the subsidiaries of centrally administrated SOEs achieved profit growth after implementing mixed-ownership reform. 

With regard to the privileges enjoyed by SOEs, observers admitted that some SOEs could still access preferential treatment in financing and resource allocation - another point highlighted in the EUCCC report, which they said should be the next focus of ongoing SOE reform. 

"SOEs serve as a stabilizer of the Chinese economy, so any reform must be conducted in a gradual manner and in accordance with China's own timetable. You can't expect changes to happen overnight," Bai said.

Newspaper headline: Time for foreign firms to adapt

Posted in: ECONOMY

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