China on defensive about market rules, poaching ideas

By Andrew McCathie Sep 14, 2006, 17:11 GMT

Hamburg - China's political and business leadership has been forced on the defensive following complaints from Western investors about restrictions on access to the Asian giant's markets and claims about the poaching of industrial ideas.

Indeed, a major business summit in Hamburg this week helped to underscore the tensions unleashed by Western accusations about counterfeiting, intellectual property rights, the forced transfer of technology and the need for greater market liberalization as China's moves to propel itself into the top league of world economic powers.

The barrage of claims left Chinese political leaders and industrials attending the summit (including Prime Minister Wen Jiabao) having to try to head off the criticism by insisting that Beijing was stepping up action to address the problems.

But Cai Weici, vice president of the China Machinery Industry Federation, bluntly warned that foreign companies complaining about the forced transfer of technology should be aware that it was a matter of competition.

Cai told the three-day summit, which was organized by the Hamburg Chamber of Commerce, that if companies were not prepared to fulfil the needs of Chinese companies, then others would.

After all, he said, Chinese companies seek out foreign partners to help in meeting their growing technology needs. China is currently drawing in foreign direct investment totalling about 60 billion dollars a year.

However, echoing remarks made by Wen at Wednesday's summit opening, Cai said: 'If we improve our awareness then intellectual property rights will improve.'

In his comments, Wen tried to allay foreign investors' concerns about his country's commitment to boosting intellectual property rights and economic reforms.

The Chinese premier told the summit opening that Beijing had already taken steps to shore up intellectual property rights. 'Now we have recognised the importance of this we will take it seriously,' he said.

'Their (foreign investors') intellectual property rights will be protected,' he said.

The Hamburg summit comes against the backdrop of a booming trade between Germany and China with the northern German port emerging as the gateway between Asia's powerhouse economy and Europe.

To be sure, China's blistering expansion growth rates and rapid economic transformation is likely to mean that the nation's bourse will become the world's third biggest stock market in the coming years.

'Five years ago Chinese companies were not known,' Ronnie C Chan, chief of the Hong Kong-based Hang Lung Group told the summit. 'Now they are acquiring companies around the world,' he said.

Further highlighting China's fast-paced change, Lutz Bethge, the managing director of the luxury accessory goods maker Montblanc International said he expects the country to replace the US as the world's second biggest luxury goods market in the next decade.

But Bethge was also forthright in warning China about the threat posed to Western business in the country by counterfeiting and the manufacture of fake brand names.

He even went on to challenge the official line on China's commitment to addressing Western industry's concerns about counterfeiting. 'To say we are getting protection is one thing', he said. 'To actually get it is another thing.'

'Clarity and legal security are for us indispensable,' Bernd Gottschalk, the chief of Germany's car industry federation (VDA) told the summit, while calling on Beijing to accelerate moves to open up its market for car supplies and to improve import conditions.

However, it was representatives of Western financial houses seeking to carve out new business empires in China's burgeoning banking and financial sector who were particularly vocal in their criticism of Beijing's cautious approach to reforming the nation's financial services market.

Ulrich Ellerbeck, a senior executive with the leading regional German bank Nordbank, told the conference that Beijing officials would never allow local banks to disappear in a wave of foreign takeovers as had been the case in Central and Eastern Europe.

'It will take a long time for a free market to show up in China,' Ellerbeck told the conference.

However, responding to the criticism, Jin Yun, the chairman of the Shanghai Pudong Development Bank told the summit that the finance sector was a sensitive area.

'We need reform in China, but it needs to be a step by step process,' Jin said.

'You may think you are moving fast but you are causing chaos,' he said reminding the summit the extent to which China's economy has been integrated into the rest of the world.