China’s Xi tries to reassure global companies that their rights will be protected

April 8, 2013

Chinese President Xi Jinping has promised to protect the interests of global companies amid rising concern among foreign businesses about discriminatory policies that hurt their operations in China.

“We will protect the lawful rights and interests of foreign-invested companies in accordance with [the] law, and ensure their rights to equal participation in government procurement and independent innovation,” Xi said on Monday. “China will never close its door to the outside world.”

In a meeting with a group of Chinese and international business leaders, the new Chinese president also pledged to step up protection of intellectual property rights, a key concern of global companies who say they are subject to pervasive intellectual property theft, corporate espionage and hacking in China aimed at stealing their technology and business secrets.

In an hour-long meeting, Xi addressed more than two dozen top executives from large Chinese and multinational companies on the sidelines of a business forum in southern China and gave some of them a chance to read prepared statements.

Zein Abdalla, the president of PepsiCo who was tasked with presenting the views of U.S. businesses operating in China, clearly outlined the heightened dissatisfaction with China’s policy environment.

“One thing many foreign companies do share is a rising concern about increasing restrictions on the types of investments we can make,” Abdalla told Xi.

“We hope the new Chinese government can continue to push forward opening up and encouraging foreign investment in more sectors, reform the administrative approval system so businesses will find it easier to enter markets, and operate freely and build a more level playing field for foreign investors relative to domestic companies.”

Davide Cucino, president of the European Union Chamber of Commerce in China, said his group welcomed Xi’s comments, but added that “we have heard similar words from previous leaders in recent years while the market access environment in China has not noticeably improved for foreign companies.”

Abdalla singled out agriculture as an area where PepsiCo and other multinationals faced increasing restrictions as Beijing focuses on building up domestic agricultural businesses.

A survey of U.S. businesses in China published by the American Chamber of Commerce in China late last month showed a large drop in the number of companies that felt China’s business investment environment was improving, from 43 percent a year ago to just 28 percent this year.

Despite heightened pessimism over the issues outlined by Abdalla, more than three-quarters of the 325 U.S. companies surveyed remained optimistic about how their own companies would perform in China over the next two years.

The Chinese market represents $250 billion to $300 billion in exports and sales for U.S. businesses, according to estimates from the U.S.-China Business Council (USCBC), which has also observed growing concern from U.S. businesses in China.

About 10 percent of U.S. businesses surveyed by the USCBC had stopped or delayed a planned project in China over the past year because of market and investment barriers.

“The new government has been saying a lot of the right things but there aren’t a lot of specifics yet,” said John Frisbie, president of the USCBC. “There’s a question over whether the reforms being discussed will address the issue of a level playing field.”

Xi formally took over as president last month. Most of his comments Monday seemed aimed at mollifying foreign investors and presenting a business-friendly image of the new administration.

His meeting with the heads of companies that included Volvo, Unilever, Standard Life, Samsung, Anheuser-Busch InBev, Mars and Sumitomo was itself quite symbolic and a departure from the practice of Xi’s predecessor, Hu Jintao, who rarely met foreign business leaders in public.

A more friendly approach toward international businesses could partly reflect concerns in Beijing that China’s own increasingly global companies could face reciprocal entry barriers abroad.

“We will try to make China’s market more equitable and attractive to investors,” Xi said. “We also hope that foreign countries will further open their doors to foreign investors. This is a two-way street and we are firmly opposed to protectionism in all its manifestations.”

Xi said China’s economy would continue to grow rapidly in the years to come, but he also noted that the days of “ultra-high-speed growth” seen in the past three decades were over and no longer desirable. He added that Beijing would focus on facilitating slower, more sustainable economic expansion.

“China’s model of development is not sustainable, so it is imperative for us to speed up the transformation of the growth model,” he said.

Duncan Innes-Ker, China analyst at the Economist Intelligence Unit, said Xi’s overall comments were a “refreshing sign,” but he cautioned that “overseas investors will look at the government’s actions rather than its rhetoric.”

“The recent attacks on Apple by the state media shows that the culture of targeting foreign firms to score domestic political points remains alive and well,” he added.

— Financial Times

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