Brittan asks for reassurances from China

Date: 12/10/1995

By Elizabeth Wise

A NEW gold rush has begun, if Trade Commissioner Sir Leon Brittan and Chinese Trade Minister Wu Yi are to be believed.

Both are pushing European business into the vast territory of China. After 350 European businessmen met 150 representatives of 21 Chinese cities and provinces last week, the two leaders kept up the momentum with the first substantive bilateral trade talks this week. During the two-day conference, sponsored by the EU-China Business Association, Wu told European business to hurry and enter the lucrative Chinese markets.

Noting that EU investment amounts to a disappointing 4&percent; of direct foreign investment in China, she almost chided Europe for poor performance. Brittan responded by saying that China must convince investors that the terrain is stable.

“We asked for tax reform, financial reform, reform of state-owned sectors and legal reforms,” said Hollants van Loocke, former Belgian Ambassador to China and president of the Belgo-Chinese Chamber of Commerce. Van Loocke said that although the Europeans seem convinced the young Chinese officials represented a change from previous monolithic Chinese generations, there were “a lot of fears”.

Van Loocke said conference participants did not raise the question of Beijing's human rights record, adding: “Companies never discuss human rights.” Brittan raised the subject during talks with Wu, but she told a news conference later: “I told him I was just a businesswoman and we did not engage in debate.”

Reminding EU officials that the US government has ceased to make human rights progress a condition for trading privileges, she complained that EU trade policy towards China “still has a Cold War colour. I think this is inappropriate.”

It seems human rights concerns will not stop European business from going into the huge new market. Wu said the conference had produced 43 business deals worth nearly 1 billion ecu.

The Commission is particularly pleased that Wu has offered to set up an information network to help European companies meet local officials, fill out contract bids and learn the ropes of doing business in China. Officials close to the Wu-Brittan meeting also said that Wu appeared close to making concessions on Beijing's monopoly over imports and exports. Foreign firms producing goods in China must get state permission to export.

At an annual rate of 11&percent;, Chinese growth is more than respectable. Wu promised continued growth, but perhaps only at 10&percent;. Seeking to ease fears about China's high inflation, which reached 21.7&percent; last year, she said the rate should fall to 15&percent; by December.

The Commission has identified a number of obstacles facing business, including acute energy shortages, inefficient transport and primitive telecommunications. Signs that the economy risks overheating are not helped by an inflation-prompting monetary policy based on credit rather than on interest rates or open markets. Beijing's continued protection of inefficient state-owned companies risks hiking inflation, as do the growing budget deficit (already at 8&percent; of GDP) and expanding money supply.

Through three years of bilateral trade talks, the Commission has been trying to obtain better access to China's markets for European goods and services and maintains it has protected European investors from discrimination, putting them on the same footing as Americans and others.

The EU has pushed China to extend to Europeans the deals worked out between Beijing and Washington on market access, intellectual property and maritime transport. The EU has also pushed a business-to-business dialogue, aimed at improving the business environment in China.

EU companies have 2 billion ecu invested in nearly 3,000 projects in China, less than half the investment of either US or Japanese firms. EU projects, in areas such as automobiles and telecommunications, tend to be large and even lead those sectors of China's economy. But the Commission worries that the Chinese perceive European companies to be less active and that Beijing will treat them accordingly, reducing the influence of EU firms.