Are European Companies Ready To Leave China?

EU said increasingly unfair treatment of foreign companies by China's government is making the country a less attractive place to do business and warned that some might leave.

BEIJING (AP) -- A European business group said increasingly unfair treatment of foreign companies by China's government is making the country a less attractive place to do business and warned Tuesday that some might leave.

"The Chinese authorities in general should not take the presence of European companies for granted," said Jacques de Boisseson, president of the European Union Chamber of Commerce in China, at a news conference.

Beijing faces mounting complaints that it is violating the spirit of its free-trade commitments by using technology and other policies to promote Chinese companies at the expense of foreign rivals. American groups also have warned that companies might reconsider business plans in China.

An annual survey of 500 European businesses found that 36 percent believe Chinese policies have become less fair in the past two years and a slightly higher percentage expect conditions to get worse, the EU chamber said.

A key complaint was Beijing's "indigenous innovation" policy, which favors domestic technology in government procurement. Companies say that will force them to hand over trade secrets and other information that might help Chinese rivals if they want to sell to the government.

The United States and EU are pressing Beijing to scrap the policy. American officials said after a high-level dialogue in May that Chinese leaders promised to make changes but a Chinese Cabinet official said the policy still will go ahead.

European companies also complained that Beijing enforces environmental rules more strictly against them than against Chinese rivals, the chamber of commerce said. They also cited spotty protection of intellectual property rights and opaque processes for company registrations, visas and work permits.

Communist leaders have tried to reassure foreign investors that are supplying technology and skills to modernize China's economy. Premier Wen Jiabao met with European business leaders in April and promised a "level playing field" with Chinese competitors.

De Boisseson called those comments "very reassuring," but said, "We are looking for the premier's words to be translated into deeds."

Despite the complaints, de Boisseson said companies see doing business in China as "a must," especially at a time of weak demand elsewhere. Some 72 percent of those surveyed were optimistic about China's growth and 64 percent said it was one of their top three global investment destinations.

Profitability has been hurt by growing competition and other issues, with the percentage of companies that said they were profitable falling to 59 percent, down from 67 percent at the same time last year during a bleak period in the crisis, the group reported.

"The number companies that declared they are profitable is going seriously down," said de Boisseson.

The percentage of companies that believe Beijing is "actively seeking loopholes" to avoid complying with World Trade Organization market-opening commitments rose to 26 percent from 22 percent last year, the group said.

De Boissesson said European companies hope to be able to negotiate changes to policies and to avoid being forced into a decision over whether to leave.

"We don't want to have to 'vote with our feet' to be heard by the Chinese government," he said.