Foreign companies in China are often discriminated in tenders where “genuine” Chinese companies are either exclusively invited or favored through all kind of tricks. Those are issues monitored by the European Chamber, through the Working Group I chair.
When authorities - often due to pressure from the central government - want to have only “real” Chinese companies, tenders are quickly announced on an obscure website or newspaper and if “foreign suppliers” show up they are told not to bother to bid as they will not be considered. Even if they do, the tender evaluation process can be easily manipulated.
Of course, difficult to prove as there is no trace on paper and foreign companies are warned not to protest unless they want to be blacklisted forever.
Now, the important point is that Wholly Owned Foreign Enterprises and Joint Ventures:
- are legally CHINESE entities;
- manufacture in most cases their products with a major local content (e.g. over 70%) - the case of wind power turbines;
- the foreign JV, in critical sectors, are minority owned by foreigners;
- have transferred their technologies at least in part to China;
- employ local workers (few expats) and pay their taxes (unlike the Chinese companies).
But the Chinese look “who is behind’ - if foreigners, forget it.
In the USA, States defend Japanese car companies as they provide local employment and are as American as Ford. Forget about that in China.
Recently the central government (e.g. NDRC) has strongly reacted to comments from the European Chamber that European windmill manufacturers have been excluded from tenders and are losing nearly all projects. The authorities claim “their windmills are too expensive” - nonsense - the EU companies could not even submit a price.
Authorities also claim the poor “domestic enterprises are discriminated in favor of imports”. Other complete nonsense. The cases we fight for are not imports but are locally produced.
The attitude and comments from the Chinese government are blatant lies and nonsense. Just a few days ago:
“Chinese Premier Wen Jiabao says cooperation between China and Germany has been developing smoothly in a variety of fields. He makes the remark during a telephone conversation with German Chancellor Angela Merkel in which the two leaders also discuss bilateral ties and other issues of common concern. He says the two sides should continue to handle their relations from a strategic and long-term perspective and keep up high-level exchanges. He says China would never discriminate against foreign enterprises or products. (Source: http://finance.qq.com)”
As I say, is equal to the announcement that “in China the Internet is free”. As pathetic.
With the world economic crisis, China was the first to go around the world and preach “against trade barriers”, like against the “Buy America” initiative - one that is by far much less of a trade barrier than China is erecting SINCE LONG.
It should be noted that many of the “big contracts” foreign companies get here are often misleading. The companies actually source most of the content on the local market.
So, if Foreign Direct Investment is falling, let it fall. Why should foreigners transfer technology and invest in factories when they are later on excluded from the domestic market?
In the case of the wind turbines it is all too clear:
- Chinese manufacturers are still behind foreign ones despite all their blatant efforts to copy and re-engineer foreign technology;
- the wind power market is very big, so China regards this as strategic and local companies should take the major market share at all cost;
- never mind quality and total life cycle cost;
- when China regards something as “important”, there are no more laws, no fair trade, just daylight robbery of technology and market share;
- “foreigners” doing (too) well in China is unacceptable.
China has killed many industries in the West. Of course, blame here the MNC who make big money through sourcing so much in China, seduce the consumers and make them dependent on cheap goods. Not all is bad - it can be good for the consumer up to a certain point.
But with the world economy still in a bad shape (ask Warren Buffett), we can expect the USA and EU to stop swallowing it all from China. On the other hand, the West has not much leverage and has only itself to blame (first being the U.S. - financed by China).
Anyway, it could be a rough ride.
[disclaimer: Gilbert Van Kerckhove is chair of the Public Procurement Working Group of the EUCCC - views expressed here are his own]
