Chamber unveils 2007-2008 Position Paper

With China's WTO transition period already at an end, European investment levels in China show no sign of dwindling as bilateral trade relations continue to flourish. The EU remains China's largest trading partner and China the EU's second-largest with total EU-China trade in 2006 amounting to €254.9 billion, an increase of 21.31 percent over 2005. For many European businesses, China represents much more than a manufacturing hub for exports; rather, it is now unquestionably regarded as one of the most dynamic domestic markets in the world, with European industry focusing considerable effort on developing long-term sustainable strategies aligned with Chinese government objectives. Nonetheless, a number of hurdles remain before EU-China trade relations can reach their full potential.

The first half of 2007 saw China continue its robust economic growth and the government push ahead with its programme of legal reform, promulgating important legislation that will have a wide-ranging impact on foreign and Chinese enterprises alike. Of particular note were the Enterprise Income Tax Law (EIT), the Labour Contract Law, the Property Rights Law and most recently the Anti-Monopoly Law. The EIT introduced specific tax incentives aimed at encouraging greater investment and development in both the high-tech and environmentally friendly sectors. This law reflects a shift in government policy aimed at encouraging investment in certain industrial sectors rather than by criteria based on geographical location.

Nevertheless, despite such legislative developments, providing a consistent legal environment in which laws are enforced uniformly at both the central and local level remains one of China's greatest challenges.

Whilst the Chinese government has already taken significant steps to curb the environmental impacts brought on by its rapid economic growth, the sheer scale of these environmental challenges mean that international collaboration in this field would be highly beneficial. In order to foster investment as well as the transfer of know-how and best-practice, the Chinese government should encourage favourable investment and research conditions so as to encourage the introduction of advanced technologies. Current caps on foreign capital, local content restrictions as well as obligations to choose Chinese partners through joint venture initiatives present significant barriers to European companies looking to introduce advanced technologies to China.

The forced transfer of technology is not only hugely damaging to European companies but also threatens the backbone upon which the very future of European industry is built. Tendencies to introduce indigenous variants in local home-grown standards, coupled with an unwillingness to engage in international standards work, sends confusing messages to the international community. What is more, continued infringements of European intellectual property rights (IPR) remain a key concern. Despite certain progress including the establishment of 50 IPR complaint centres and the open approach of the State Intellectual Property Office (SIPO) during the 3rd revision of the Patent Law, the reality remains that piracy problems continue to outpace the solutions. Indeed, more than 80 percent of counterfeit products seized by EU customs originate from China.

Booming trade ties and changes in the economic structure of both economies understandably result in trade frictions. Indeed, with the rapidly growing trade surplus, trade disputes continue to escalate between China and some of its trading partners. Recently, in an effort to alleviate such pressures, the Central Government issued a circular aimed at reducing VAT rebate rates to try to slow down the pace of exports growth and to discourage the development of high energy-consuming, environment-polluting and natural-resource consuming industries. Whilst such steps may be welcomed by most sectors, the unpredictability of the business environment remains a concern.

A lack of transparency in terms of rule-making activities as well as a lack of coordination between authorities remains one of the most significant barriers to doing business in China. Further protectionist elements appearing in the September 2006 Merger & Acquisition Rules as well as the recently promulgated Anti-Monopoly Law stipulating that sectors deemed to be of vital importance to China's "national security" are exempt from the effects of the law, sending worrying messages to foreign investors looking for a stable and fair business environment.

Of particular concern is the impact that such regulations will have on industries such as telecommunications, energy, oil and petrochemicals. With practically no progress in terms of market liberalisation since WTO accession, there are concerns that recent regulatory developments will only lead to greater restrictions on foreign involvement in the sector. Whilst this affects European companies, ultimately, it is the Chinese consumer who stands to suffer from elevated prices and restricted choice. The benefits of accessing the world trade system are clear for all to see in China. Resisting global protectionist temptations would allow China to push ahead and embrace a truly international approach enabling it to establish itself as a leader in commerce and innovation.

Despite certain challenges, European industry remains positive about the future of EU-China trade relations. This is clear from the continued arrival of new European companies, particularly a new wave of small and medium-sized enterprises who now see China as realistic and accessible, not just for manufacturing but also for distribution and sales. The last year signalled a defining point for the financial services sector. In line with its WTO commitments, by the end of 2006 the Chinese banking sector had opened up substantially to foreign players, a move greatly welcomed by European banks.

While progress in other service sectors in China are still disappointing, the European business community remains at-the-ready to work closely with both the Chinese business and political community as China continues with its programme of reform and further market liberalisation.

EU Commissioner Kyprianou visits

With the aim of discussing improved cooperation on food safety and public health issues, the EU Commissioner for Health Markus Kyprianou visited China on September 6. During the visit Commissioner Kyprianou participated in sessions on the World Economic Forum's "Inaugural Annual Meeting of the New Champions 2007", and had meetings with the Chinese Vice-Premier, Minister for Quality Supervision, Inspection and Quarantine and the Ministers for Agriculture and Health.

Speaking ahead of his visit, Commissioner Kyprianou said: "Chinese products account for the largest number of food safety alerts to our rapid alert system, and this trend is growing. While this partly reflects the volume of trade, it is also symptomatic of a number of problems we have encountered which need to be addressed."

Members of the European Chamber's Working Groups in Shanghai and Beijing were able to meet Commissioner Kyprianou ahead of and following his meetings with the Chinese Ministers to express the views and concerns of the European Chamber's member companies operating in China.

The first meeting with Commissioner Kyprianou was held on September 10 in Shanghai with representatives from the Shanghai board and the European Chamber Food and Beverage Working Group, reflecting retailers, distributors, producers, importers caterers of food products in China.

In this meeting the members of the European Chamber insisted that the EU needs to be tougher with ensuring that standards are adhered to. It was argued that Chinese companies should do more than just meet the basic requirements for goods exported to Europe and become more focused on quality instead of only on their profit margins.

The members also expressed clear dissatisfaction at the way regulations are inconsistently implemented across the country and how foreign companies are targeted. Member believe that catching a foreign company "in the act" would earn a local government official significant kudos and lead to some companies receiving excessive and unnecessary visits from local officials. This situation means that smalle local companies are overlooked even though these companies have been proven to cause more serious and consistent breaches of the regulations.

The second meeting with Commissioner Kyprianou was in Beijing on September 12 after he met the Chinese Ministers and was hosted by the EU Deputy Head of Delegation Michael Pulch. Led by the President of the European Chamber and including representatives from the Healthcare Equipment, Insurance and Pharmaceutical Working Groups, this meeting involved a discussion of the healthcare environment in China.

The members present at this meeting explained that despite the high liquidity in China and the good regulations being adopted, they are concerned that the level of state spending in the healthcare sector is in most cases not sufficient enough to guarantee appropriate access to health and the implementation of the laws. Another concern of the members was concerning the shortcomings in the financing of hospitals, which has resulted in hospitals over-prescribing, problems with the transparency of tenders and increasing healthcare costs.

The members from insurance companies have found the situation difficult as the missing data from the authorities have made it problematic for them to offer sustainable and accurately priced health insurance. Although it was recognised by the members that the central government seems to be determined to improve patient health and consumer safety, the members argue that local protection makes it virtually impossible in some cases.

Following these meetings in Mainland China, Commissioner Kyprianou visited Hong Kong to discuss issues concerning animal health, quarantine and vaccinations for the equestrian sports Olympic Games in Hong Kong in 2008.

HCIA Official National Alumni Gathering 2007

On August 25 the European Union Chamber of Commerce in China received an award at the Hong Kong China Internship Association (HCIA) Official National Alumni Gathering 2007.

HCIA was founded in 2005 with the objective of identifying talented young people and providing them with the experience and skills to develop a successful international career. HCIA regularly organises international internships programmes, seminars and conferences with the involvement of industry regulators, experts, and the 500 member businesses and organisations covering many regions including Europe and Asia.

The HCIA Official National Alumni Gathering 2007 included representatives from universities in Mainland China, as well as business associations and private companies. During the evening, the European Chamber was awarded with a "Good Friend of HCIA" award for its commitment to developing the skills of young people.

The European Chamber would like to take this opportunity to thank the HCIA for warmly welcoming the European Chamber at the event and for the award, and expresses its willingness to further develop cooperation with HCIA in the future.

ShDRC welcomes Chamber

On September 10, the chairman and local board members of the Shanghai office of the European Chamber met with the Shanghai Municipal Development and Reform Commission (ShDRC) at the iconic People's Square Headquarters.

The European Chamber was welcomed by the senior official, Director Jiang Yishi, and a group of section heads and directors. This gave the opportunity for the European Chamber to introduce itself and activities. Chairman K.K. Ho led the discussion supported by local board members Piter de Jong, Didier Baudrand and Richard Zhang.

The European Chamber ensured that the mission statement and operational activities of the organisation were clearly passed on to the ShDRC delegates, talking at length about small and medium-sized enterprises and the need for the European Chamber to build stronger ties in the municipality. This was acknowledged by the ShDRC. The government authorities showcased the development of the city and demonstrated a clear interest in addressing environmental issues and promoting the 2010 Expo. They also applauded the involvement of European industry in the rapid growth of the last 20 years.

It is hoped that this will be first of a series of visits by the Shanghai local board to top-level government departments. It is important that the lobbying work of the European Chamber, already strong in Beijing and other cities, is backed up with continued efforts in Shanghai.

EU Parliamentary Greens visit Chamber in Shanghai

On August 30, the Shanghai office of the European Chamber met with a visiting delegation of the Members of the European Parliament from the Green Party/EFA (European Free Alliance), led by Co-President Monica Frassoni.

The European Chamber was represented by Board Member Pieter de Jong and General Manager Thomas Felber. The meeting was intended to allow the visiting delegation the chance to be briefed directly by those in industry. To that effect, the European Chamber invited relevant Working Group members to participate and ensure that the interests of European industry were properly represented. This included the Chairperson of the Environmental Working Group, Frederic Grivel from SSWS, as well as Sabrina Gu from B&Q, and Berenice Voets from APCO as representatives from the CSR Working Group, and Sabine de Villoutreys from Arkema and Matthew Durham from Simmons & Simmons on behalf of the HR Working Group.

At the informal lunch briefing, Piter de Jong gave a short welcome speech, highlighting the importance of green issues in China. Co-President Frassoni introduced her colleagues, a delegation of 15 people from many European countries representing a wide number of environmental and social issues. Members of the Working Groups then introduced their general topics and gave information on how the groups function. A lively and frank discussion followed with topics including energy efficiency, securing supply chains, and ensuring quality in labour standards.

The European Chamber welcomes the Greens/EFA to visit China again soon and looks forward to more cooperation in the future.

New cosmetics policy

On the July 30, 2007, the General Administration of Quality Supervision, Inspection and Quarantine (Aqsiq) and the Ministry of Health (MOH) jointly released Notice No. 2007-116.

According to this notice, importers will no longer be requested to provide the Cosmetics BSE Certificate issued by the health administrative department or its officially authorised agencies in BSE infected countries when applying for the hygiene permit (or notification certificate) with the hygiene administrative department under the State Council or declaring for inspection and quarantine with the import-export inspection and quarantine authorities.

This notice became effective on August 31, 2007. This was one of the key recommendations of the Cosmetics Working Group Position Paper in the past. The European Chamber's Cosmetics Working Group welcomes this new policy, which will promote a more efficient operating environment for international cosmetics companies. The Cosmetics Working Group will attentively follow the next steps of Aqsiq and the MOH.

Law seminar held in Chinese

On the August 30, the Legal Working Group of the European Chamber in Shanghai held a Seminar on the New Labour Contract Law in Chinese.

It was the first time that the European Chamber in Shanghai organised a seminar in Chinese, specifically focused on aiding local Chinese staff.

The Chamber was delighted to welcome Ding Yi, Associate at Baker and McKenzie, as speaker. Throughout her detailed presentation and answers to the questions, Ding provided valuable insights into the changes the new law will bring to both employers and employees.

In the future, the European Chamber is planning to hold more seminars in Chinese aimed at enhancing cooperation and communication between the European Chamber and the Chinese professionals of member companies.

Local community day coming up

Corporate social responsibility (CSR) is a concept where companies integrate social and environmental concerns into their economic activities and interactions with stakeholders. One of the primary aims of the European Chamber CSR Working Group is to raise awareness among European companies of CSR activities in China.

As the interest in CSR is growing and in light of the increasing success of the European Chamber CSR Working Group, a "European Chamber Communication Day" is being organised with a view to introducing members of the European Chamber to disabled children and participating in a day of fun activities together with these children. The overall objective is to have volunteers and children with disabilities interact with each other through organised activities.

The project, which is open to all staff members, will give the members of the European Chamber an opportunity to volunteer to help different groups, including those with hearing disabilities, visual disabilities and autism, to communicate better with the outside world.

The European Chamber Communication Day will take place on November 3, and consist of activities that have been carefully designed to meet the children's special needs. Volunteers will learn how to interact and communicate with the children and in return gain the satisfaction of making a small difference. Those who register for volunteering will be divided into teams. Each team will have an assigned leader, who will be given some basic training prior to the event. For each team there will be dedicated activities. At the end of this day all volunteers will be invited to an evening gathering to reflect on the day's experience and talk together informally. We would like to encourage as many people as possible to volunteer their time to this meaningful activity and come and enjoy a great day out with others.

This is a great opportunity for all members of the European Chamber to get involved in Shanghai's local community and demonstrate your company's commitment to CSR activities. It is only for one day and the immediate results will be hard to beat!

To secure your participation, please contact Mahsa Bouromand at mbouromand@euccc.com.cn

Conference on HR

Building on the successful HR Conferences in 2005 and 2006, the European Union Chamber of Commerce in China's Shanghai office is delighted to announce that the 3rd European Chamber HR Conference will be held on November 28 at the Hilton Hotel in Shanghai. This full-day event will feature three key speakers and a panel discussion in the morning plenary session, and three workshops in the afternoon session. Please note that in the afternoon session each participant may select three of the six available workshops.

An HR Vendors' Expo will be running concurrently with the conference. We are currently inviting companies to take advantage of our sponsorship packages, which range from RMB8,000 to RMB15,000. Sponsors will be given the opportunity to have a booth and interact with conference attendees. We anticipate around 150 professionals will attend the full-day event. To increase visibility for potential sponsors, the booth area will also be open to visitors who are not attending the conference.

For more information on how to become a sponsor of the 3rd European Chamber HR Conference please contact Joao Gago at jgago@euccc.com.cn or (21) 6385 2023 ext. 113.

Shanghai gets 500th member

The Shanghai office of the European Chamber welcomed its 500th member in the first week of September, only five years after the its founding in 2002.

Since its establishment in Shanghai, the European Chamber has achieved continuous growth in membership and expects to keep expanding over the coming years. We are proud of the fact that more and more companies are joining the "Voice of European Business in China" and are increasingly participating in the European Chamber's ongoing lobbying efforts.

HR Working Group holds seminar

On August 22, the Human Resources Working Group of the European Chamber's Pearl River Delta office met for a seminar on recruitment and interview skills. Audraie Lecocq, HR Executive at ClarkMorgan Guangzhou, gave a presentation on the different styles of conducting a job interview and the details the interviewer should pay attention to.

Lecocq showed the group how to create the right questions for the company's needs. She also shared her experiences gained in her current and recent jobs as a HR manager. It was stressed that the interview is only one part of the whole recruitment process and should not be the only method used to find the right person for a vacant position.

Concerning the questions asked at an interview, Lecocq explained the reasons why the interviewer should prepare a questionnaire and ask the same questions to all candidates being interviewed for the particular position. Other pieces of advice offered by Lecocq included using a points-based system for evaluating candidates at an interview and how to avoid letting biases affect the evaluation process.

New Guangzhou HR Working Group chairs
Chair: Nancy Huang (Total Petrochemicals China)
Co-Chair: Nancy Wu (Hewitt Associates Consulting)

Business networking event in Shenzhen

Following the successful event on July 3, the European Chamber organised a second business networking Event in Shenzhen on August 28. The aim of the event was to give the members of the European Chamber the opportunity to meet people from different sectors in the Pearl River Delta. The members were able to discuss a particular topic with others who have similar interests over dinner in a relaxed environment.

At least one expert in the chosen field was at each table to answer questions and share experiences. The topics discussed were local bureaus and how to deal with them, the supply chain in the Pearl River Delta, food safety and health, the current tax reforms in China, and cultural miscommunications in human resources.

Due to the growing interest in this type of business networking event, the European Chamber will organise similar events in Guangzhou and Shenzhen in the near future.

Merkel visits Nanjing for 'Cities in Motion'

Although renowned as the cultural capital of China, Nanjing has been relatively neglected by the Chinese and foreign media in favour of Beijing, Shanghai and the Pearl River Delta, especially with commercial issues.

Many in the area have felt that this lack of attention is undeserved, but it now seems that with the announcement of Nanjing as the first stop of the three-year campaign "Germany and China: Moving Ahead Together", the cultural and economic potential of the former Chinese capital will be recognised.

The "Germany and China: Moving Ahead Together" campaign will be under the patronage of the President of the Federal Republic of Germany, Horst Koehler, and the President of the People's Republic of China, Hu Jintao. The campaign will finish in 2010 in Shanghai and aims to present a "modern, creative and future-oriented Germany" by introducing the country's culture, science, economy and lifestyle to people across China.

To officially launch the campaign, German Chancellor Angela Merkel came to Nanjing on August 28. The launch was marked by the opening of a classic ballet Romeo and Juliet, jointly performed by the Stuttgart Ballet and the National Ballet of China, which the German Chancellor attended together with the Party Secretary of Jiangsu province, Li Yuanchao, and the Governor of Jiangsu province, Liang Baohua. Romeo was played by a German dancer and the part of Juliet by a Chinese dancer-providing an interesting analogy of the vision of the relationship between the two countries.

Under the theme "Cities in Motion", the campaign will hold a series of events focusing on different topics such as urban culture, mobility and energy efficiency. One of the most anticipated events for Nanjing will be the "German Esplanade" programme that will take place from October 19 to October 27 in the city centre. Pavilions of some of the almost 1,000 German companies presently investing in Jiangsu province (including Allianz, BASF, DHL and Siemens) will showcase innovations from a variety of fields such as energy, finance and transportation. Citizens of Nanjing will also be able to enjoy famous German beer and food while listening to German bands playing music on the centre stage.

Various cultural events are scheduled to be held in the time leading up to and after this week, starting with an art exhibition by Markus Luepertz, a famous German artist. There will also be the premiere of a documentary movie about John Rabe, the German senior representative of Siemens in China who saved hundreds of Chinese lives during the Nanjing Massacre and whose house, now a museum, was visited by former German President Roman Herzog earlier this year.

Other events include the first German Film Festival in Nanjing's history as well as several German classical and pop music concerts. Universities in Nanjing are also getting involved in the campaign by hosting educational and academic exchange programs, including scientific forums, seminars and workshops.

NNIT, the Danish pharmaceutical giant Novo Nordisk's newly invested company, recently became a member of Danish Chamber and the European Chamber. Jonas Dan J�rgensen, General Manager of NNIT, spoke to the Danish Chamber about his vision for the Chinese IT market.

Danish Chamber: What does NNIT have to offer the Chinese market?

Jonas Dan J�rgensen: High-quality IT services with core competencies in two regulated industries - pharmaceutical and food. We hope to be a good alternative to the local IT service providers for European and international companies with our long history and experience in delivering IT services.

DC: What is the vision behind the establishment of your company in Tianjin?

JDJ: The vision is to offer high quality IT services to primarily International companies in China. Furthermore we will offer support to our Danish organisation with our highly skilled employees. Our services vary from facility management and hosting to development, test and quality assurance.

DC: The IT market in China is getting very competitive. What is NNIT's niche in the Chinese market?

JDJ: Our core competency is our pharmaceutical industry knowledge with a huge emphasis on high quality in everything we do. In the last 10 years we have acquired more than 300 customers outside the Novo group and have gained a lot of experience in balancing the level of quality to be able to offer competitive solutions and prices to industries other than the pharmaceutical and food industries discuss our daily challenges and opportunities.

DC: How do you evaluate the market prospects in the IT sector?

JDJ: The IT market is becoming more and more challenging globally and we see that more and more companies and competitors will enter the Chinese market due to the highly skilled people and increasingly improving English skills. The IT market is very interesting for us because many-if not all-of our European customers also have factories and offices in China and need our help.

DC: Did you already acquire some IT projects in China?

JDJ: No, not yet. We plan to start cooperation with Novo Nordisk as soon as possible, though, and then you will see us approaching customers in the Tianjin and Beijing areas.

DC: What expectations do you have of your membership with the Danish Chamber and your membership with the European Chamber?

JDJ: My expectation is to get a good network and look forward to participate in the industry specific working groups. I can see all members are very professional companies from whom I know I can learn a lot. There are several groups that have my attention and interest. The hot topic is currently the new labour contracts and the prospects of the IT market. I look forward to meet like-minded European Chamber members to discuss our daily challenges and opportunities.

upcoming events

Supply Chain Management Seminar

2:30pm
Venue to be confirmed
Following the great interest expressed by members, the Sourcing Working Group of the European Chamber Nanjing office has decided to hold a series of seminars and discussions on supply chain management. The next seminar will focus on the subject of initial public offerings, specifically how to better coordinate their work with local purchasing strategies. To share professional views and ideas on the topic, the Chamber is pleased to invite a speaker from the China Supply Chain Council, with which the Sourcing Working Group has successfully cooperated in the past. A purchasing manager from a Nanjing member company will also present a case study based on his own experience.

Human Resources Working Group

7:30pm
European Chamber Tianjin office
Building A4, 6/F, Magnetic Plaza, Binshui West Road and Shuishang East Road, Nankai District, Tianjin Municipality Tianjin's next Human Resources Working Group Seminar will be a discussion of the new Labour Contract Law.