China must quell European pessimism

China, which has been a top business hub over the last two decades, is now experiencing slow growth amid increasing hostile business environment and lack of political will to accelerate structural reforms, triggering pessimism among European companies.
Fifty-six per cent of European firms polled by the European Chamber of Commerce in China said they are finding it more difficult to do business in the world’s second largest economy, a five-point increase from a year ago, the group said in its annual Business Confidence Survey.
US firms too say they feel increasingly unwelcome in China, citing concerns about the business climate.
However, these Western views have been downplayed by Stuart Gulliver, chief executive of HSBC. Though he acknowledges the reforms were slow in China, he argues that China’s size meant its progress would not follow the same pattern as other emerging markets.
Global markets have overstated the risks posed by China and underestimated the country’s ability to continue reforming its economy, Gulliver said recently.
Despite the economic slowdown, China’s economy grew 6.9 per cent in 2015, the weakest rate in a quarter of a century, but still one of the highest global growth rates. Anxiety over the increasing difficulties of doing business in China is seen in the information-technology and telecommunications industries given additional market access barriers, and in the machinery and chemicals sectors because of excess capacity.
For years, Beijing made pledges to reduce barriers, but the reforms walk at snail’s pace, causing disillusionment in China’s reform agenda. Surveying the trends, “it often seems that Beijing is moving in the opposite direction of reforms”, the recent survey said.
Another significant difficulty was new national security-related legislation, with 40 per cent of respondents saying that they felt the laws discriminated against them.
One particular point of concern was a sweeping new regulation on foreign non-governmental organisations that would restrict the ability of groups, potentially including the chamber itself, to operate in the country.
China’s failure to deliver on promises to provide a more open, competitive market put at risk its articulated efforts to foster the innovation to develop globally competitive companies and new strategic industries.
“The government has repeatedly promised to enact reforms aimed at shifting the market to the heart of the nation’s economy. In fact, it often seems that Beijing is moving in the opposite direction, promulgating vaguely worded, security-related laws and strangling Internet access to the point of harming domestic, as well as international, businesses,” the chamber said in the report. ”
But HSBC CEO has been striking a balanced tone between the pessimism felt by the western firms and the slow reforms when he stated: “Whilst I understand the pessimism of some observers relating to China, I fundamentally don’t agree with it.” To breathe new life into the economy, Beijing has put forward its Internet Plus and Made in China 2025 plans to make the country a world leader in advanced industries such as semiconductors, robotics and satellites.
To continue to be the bedrock of global economy, China has to accelerate reforms in a manner that promotes fair competition.