European businesses criticize China-EU relationship

The European Union Chamber of Commerce in China called on Beijing to follow through with its proposed economic reforms and lift restrictions on foreign investment, as the country prepares to host the G20 summit for the first time starting this weekend.

"European business continues to hear reform commitments aimed at affording foreign-invested enterprises more market access," the European Chamber said in an annual report published on Thursday. "As welcome as these are, they have been heard before: it is hoped that words will now be paired with actions."

Criticism of the country's business practices has mounted as Chinese companies, motivated by a slowing economy, have sought out desirable European "targets," or potential acquisitions. Chinese foreign direct investment (FDI) in Europe hit an all-time high of $23 billion (20.6 billion euros) in 2015, while 2016 has already seen a number of high-profile acquisitions of European firms.

Lack of balance

Meanwhile, European investment in China continues to be stymied by prohibitive state controls, the European Chamber said. While Chinese companies were able to engage in acquisitions such as Fosun International's deal to purchase German bank Hauck & Aufhäuser in 2015 and Midea's purchase of German manufacturer Kuka earlier this year, European firms continue to be prevented from acquiring such high-profile brands in China.

During the Third Plenum in 2013, the Communist Party leadership vowed "to allow the market to play a ‘decisive role' in the allocation of resources." Since then, however, Western businesses have seen little indication that China wants to open up free-market access.

This is reflected in the country's most recent Five-Year Plan, approved in March, which outlines the government's goals for the economy for the next half-decade. The plan puts more emphasis on state-owned enterprises (SOE) playing a hand in the economy, apparently contradicting the desire to let the markets play a bigger role.

Plan should be ‘dusted off'

China, for its part, has argued in the past that its restrictive measures are a way to keep its most competitive firms in check. But the European Chamber said such policies could prove to be harmful for all parties, and that Beijing should "dust off" its old plan and free up the market.

"While Europe welcomes foreign investment, this lack of reciprocity is unsustainable and could lead to protectionism and increased tension," the organization said.

China will host the G20 summit beginning on Sunday amid growing pessimism for free trade agreements and open markets. Earlier this week, the International Monetary Fund (IMF) released its own report, in which it called on the G20 to do more to promote globalization.