Chinese Premier Wen Jiabao pledged that foreign businesses in China will be treated fairly in one of the government’s most direct moves yet to counter concerns about its policies among international executives.
Mr. Wen’s comments, made before an audience of global business leaders at a meeting of the World Economic Forum in this eastern port city, were unusual for acknowledging some policy missteps by China. The recent debate about China among foreign investors, he said, “is not all due to misunderstanding by foreign companies. It’s also because our policies were not clear enough.”
Foreign companies in China have in recent months repeatedly complained of inconsistent enforcement of rules and regulations, a government procurement process biased toward local companies, and insufficient protection for intellectual property rights. But Mr. Wen said China’s commitment to an open trade and investment environment hasn’t diminished.
“China is committed to creating an open and fair environment for foreign-invested enterprises,” Mr. Wen said. He firmly defended the government’s track record. “Foreign-invested enterprises in China on the whole enjoy a good environment and have reaped good returns. Many have become platforms for the global growth of their parent companies.”
China has attracted more than $1 trillion of foreign direct investment, he said, noting that businesses have continued to pour billions of dollars more into the country this year. “All this demonstrates that the efforts of the Chinese government to foster a good business environment have been recognized by foreign investors,” he said.
Still, the relationship between foreign business and China’s government has been somewhat rocky recently. In one prominent episode, foreign companies loudly protested “indigenous innovation” policies that would have established catalogs of domestically-developed products to receive preferential treatment in government procurement. Global companies feared that even technologies and products they developed at their Chinese-registered subsidiaries and joint ventures would be excluded.
Following those initial complaints, China has revised the rules and clarified that the Chinese operations of foreign companies can receive treatment as “indigenous” innovators under that law. Mr. Wen emphasized that point with rhetorical flourish on Monday.
“Any company registered in China according to Chinese law is considered a Chinese company. The products they produce are all Chinese-made. The innovative products they develop are all Chinese innovations. Foreign companies registered within China’s borders all enjoy national treatment,” he said. “At the same time, China’s government procurement gives a level playing field and equal treatment to goods made in China, whether by foreign-invested companies or by Chinese-invested companies.”
Some prominent foreign executives speaking at the forum on Monday declined to criticize Beijing’s foreign-investment policies. Ferdinando Beccalli-Falco, chief executive for international operations at General Electric Co., for instance, said the company hasn’t had a problem with government procurement policies, despite the fact that the majority of its China revenue comes from purchases by government and state-owned enterprises.
He also played down earlier remarks by GE Chief Executive Jeff Immelt, who complained at a private dinner in June that it is getting harder for foreign companies to do business in China. Mr. Beccalli-Falco said Mr. Immelt’s comments were “unfortunately misrepresented,” and he meant only that Chinese competition is intensifying as the country becomes an industrial power. “I mean, it is in the right interest of the Chinese to develop their own state-owned enterprises and their own technologies,” Mr. Beccalli-Falco said.
“China is a less interesting market to us than India.”
Steve Ballmer, CEO, Microsoft Corp. (May 23, 2010)
“The forced disclosure of know-how…does not exactly correspond to our views of a partnership.”
Jurgen Hambrecht, Chairman, BASF AG (July 17, 2010)
“Foreign companies have faced problems in China that are unthinkable in a normal business environment.”
Katsuya Okada, Foreign minister, Japan (September 3, 2010)
In his wide-ranging speech to the forum, Mr. Wen also re-emphasized the government’s commitment to curb wasteful use of energy, which he said is the only way an economy of China’s size will be able to deal with the world’s limited supplies of resources. He said the government would favor businesses and technologies that help China more efficiently use energy and natural resources.
“China’s development should always give high priority to energy conservation and environmental protection. This should be our unwavering policy,” Mr. Wen said. “We should vigorously develop innovative, high-value-added products that are energy-saving and environmentally-friendly. That is the only way we can put our businesses and the entire Chinese economy on the track to sustainable development.”
Mr. Wen didn’t directly address the recent issues that the government’s efforts to meet its energy-efficiency targets have created, with some local governments shutting down factories and imposing electricity blackouts. But he did re-iterate the government’s commitment to a set of policies, in place since April, that have curbed housing purchases and led to a pause in the once-rapid ascent of real-estate prices.
“Stabilizing housing prices and providing housing availability are important responsibilities of governments at all levels,” Mr. Wen said, but emphasized that the government’s policies are not just aimed at short-term market movements but at creating a healthier market over the long term. The government wants to see less speculation and increased supply of mid-range and public housing, he said.
Wen also pledged to push forward with reform efforts, including “deepening the reform of economic and political structures.” Wen has brought up the subject of political reform in recent public appearances, but hasn’t elaborated on specific changes.
