Business - China U.S. group says worried about China protectionism Report echoes complaints from companies and other business groups

By Joe McDonald

AP Business Writer

BEIJING (AP) -- A major U.S. business group said Monday it sees signs of growing protectionism in Chinese industries and called on the government to open markets further to foreign companies.

The American Chamber of Commerce in China gave a generally upbeat assessment in an annual report on business conditions. But it expressed concern the government was slowing market-oriented reforms and trying to promote domestic technology companies and others by blocking foreign rivals.

"We see many actions in the area of innovation, in other areas of industrial policy, which suggest to us that in the future in a number of areas, the market opportunity will begin to get narrower," said the chamber president, Christian Murck, at a news conference.

The report echoed complaints from companies and other business groups that Beijing is favoring Chinese producers in government purchasing and using other measures to support local companies. They say that is a violation of the spirit of China's World Trade Organization market-opening pledges.

The chamber called on the Chinese government to speed up economic reforms and rely more on the free market.

"Structural changes are needed," said the report, which includes policy recommendations to Chinese and U.S. leaders. It called for easing restrictions on foreign involvement in China's economy such as limits on ownership of banks and financial firms.

Foreign companies were alarmed in November when Beijing announced it would favor Chinese-developed technology in government procurement to promote domestic innovation. The government backed down after an outcry by foreign businesses and governments and promised this month to treat all companies equally.

The American Chamber said environmental rules are enforced more strictly against foreign companies than against Chinese rivals and treatment in patent enforcement is unequal.

Regulators are enforcing China's new anti-monopoly law on business deals that involve foreign companies but not against domestic rivals, said Lester Ross, a lawyer and American Chamber board member.

Companies are "disfavored or discriminated against" in government purchasing because local authorities believe Beijing wants them to buy only from wholly-Chinese suppliers despite pledges of equal treatment, Ross said.

Still, the American Chamber report emphasized that U.S. companies are optimistic about China's quick rebound from the global economic slump and many say their profits have already recovered. It said the number responding to a survey that described themselves as optimistic nearly doubled from 14 percent in 2009 to 27 percent this year.

The report said 71 percent of companies surveyed reported their China operations were profitable in 2009 and said nearly four out of five planned to expand investments in China in 2010.

The report made no mention of China's currency controls, a key source of tension with Washington and other trading partners. They say Beijing keeps its yuan undervalued, giving its exporters an unfair price advantage, and some American lawmakers are pushing for punitive action against Beijing if it fails to act.

Murck said currency is "not a top issue" for U.S. companies in China because most produce and sell in the domestic market and are unaffected by exchange rates.

Published: Tue, Apr 27, 2010

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