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Business group says China needs to speed up reform

European Chamber of Commerce in China says it risks possible "crisis"


BEIJING — Beijing needs to speed up economic reform and curb the dominance of state companies or risk an economic slowdown and a possible crisis, says the European Chamber of Commerce in China.

The business group adds to warnings that Beijing needs to open the state-dominated economy and not use regulation to promote growth of Chinese industry. It comes amid a series of anti-monopoly investigations of global auto and technology brands that business groups say unfairly target foreign competitors.

With economic growth slowing, China “needs a whole new era of reform,” said the chamber president, Joerg Wuttke. He said the pace of reform under President Xi Jinping has been “too slow and cautious.”

Beijing’s economic overhaul plan announced in 2013 plan calls for making China’s economy more productive by opening more industries to private and foreign competition. But at the same time Beijing is trying to create “national champions” in fields from autos to telecoms to aerospace. Political analysts say resistance from state industry and its allies in the ruling party might also have hampered the most ambitious reforms.

Beijing has announced a steady drumbeat of regulatory changes including plans to allow privately owned banks. But it has yet to make significant changes in the role of state companies that dominate industries from oil to telecommunications to insurance and that reform boosters say are a drag on growth.

China’s economy grew by 7.5% in the three months ended in June, but that was barely half of 2007’s 14.2% rate. Beijing is trying to steer the economy to growth based on domestic consumption instead of exports and investment. But analysts say the latest growth was achieved only because of stimulus spending.

The European chamber, which represents 1,800 companies, appealed for changes including opening more industries such as banking and health care to private competition. It called on the government to make regulation more evenhanded and predictable.

Without faster action, “the commitment of foreign business to China may start to wane and, at worst, the economy could be headed for crisis,” said the European chamber’s report.

It said European companies have reduced investment plans and are looking at other Asian economies as more profitable possible destinations.

The chamber expressed concern last month about the anti-monopoly investigations. It said it received reports companies were pressured by regulators to accept penalties without a full hearing and avoid involving their governments.

Wuttke said the group had asked to talk to Chinese regulators about the complaints but were unable to obtain a meeting.

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