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EURObiz

Journal of the European Union Chamber of Commerce in China

www.europeanchamber.com.cnNovember/December 2011

Executive Perspectiveson European Business

in China

CHINA IN THE WTOThe First 10 Yearsand the Next 12 Months

CHONGQINGChina's Chicago

FOOD SAFETYBecoming a Consumer Issue

LOCAL MARKETINGEmbracing the 'Shanzhai' Way

THE EXECUTIVE INTERVIEWAndr Loesekrug-Pietri, A Capital

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COVER STORY

17EXECUTIVEPERSPECTIVES:EUROPEAN BUSINESSIN CHINA

EURObiz sat down with leadingexecutives based in the two regions todiscuss the state of European Businessin China for their perspective on thecurrent situation, and some insightinto what may be expected in theshort-term.

31CHINA IN THE WTO:THE FIRST 10 YEARSLooking at how far the EU-China

relationship has come via the WTOand where it will potentially go.

48CHONGQING:CHINA'S CHICAGONew, brash, alternative and exciting

Chongqing is a city growing ata phenomenal pace, the river portand former wartime capital hastransformed into one of the worldslargestmunicipalities.

TABLE OF CONTENTS

17 4831

BUSINESS FEATURES

10EUROPEAN CHAMBERLOBBYING REPORTA summary of recent

lobbying activities.

40MARKETINGIs China ready for homemademarketing? Maybe not, but manydomestically-developed marketingsolutions are nding traction not

only among executives, but with thebuyers they are intended to reach.

42FOOD SAFETY

Food safety issues that have emergedin China and how they are beginningto change the eating and purchasinghabits of Chinese consumers.

44SMEsNumerous factors and the size of themarket are sending European UnionSmall and Medium-Sized Enterprises

(SMEs) to China. The EU SMECentre looks at the opportunities.

46IPRThis second of two parts providespractical advice on how to protect

your rights related to online assets,including registration of top-leveldomain names (TLDs) in China.

50EUCTPChina's 12th Five-Year Plan

highlights sustainable urbanisationas a primary focus for futuredevelopment, owing to the increasedconcentration of population thatwill live in cities in coming years.

58THE EXECUTIVEINTERVIEWAndr Loesekrug-Pietri, Chairmanand Managing Partner, A CapitalChairman, Private Equity &Strategic M&A Working Group,

European Chamber

REGULARS

09PRESIDENTSFOREWORD39CALENDAR

52

EVENTS GALLERY

54CHAMBER BOARD

56ADVISORY COUNCILOn the coverExecutives fromEuropean companies offive different countriesoffer their perspectiveson the state of EU-Chinabusiness, and what thenear future might holdin store for both sides.

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EURObizJournal of the European Union Chamber of Commerce in China

www.europeanchamber.com.cn

BeijingBeijing Lufthansa Center,

Office C412,50 Liangmaqiao Road,

Beijing, 100125, P.R. China

C-412Tel: +86 (10) 6462 2066Fax: +86 (10) 6462 2067

[email protected]

Chengdu04-A, F16, Tower 1, Central

Plaza, No.8 ShunChengAvenue, Jinjiang District,

Chengdu8

11604-ATel: +86 (28) 6155 7184Fax: +86 (28) 6155 7194

[email protected]

Guangzhou -Pearl River Delta (PRD)Unit 2817, 28/F, Tower A,

China Shine Plaza,No.9 Linhe Xi Road,

Tianhe District,Guangzhou, 510613,

P.R.China9

A2817Tel: +86 (20) 3801 0269Fax: +86 (20) 3801 0275prd@europeanchamber.

com.cnShenzhen -

Pearl River Delta (PRD)Rm 308, 3/F ChineseOverseas Scholars

Venture Bld,South District, Shenzhen

Hi-tech Industry Park,Shenzhen, 518057,

P.R. China3308

Tel: +86 (755) 8632 9042Fax: +86 (755) 8632 9785prd@europeanchamber.

com.cn

NanjingZhujiang No.1 Building,

30/F, E11 Zhujiang Road,

Nanjing, 210008, P.R.China1

130E1Tel: +86 (25) 8362 7330 /

8362 7331Fax: +86 (25) 8362 7332

[email protected]

ShanghaiUnit 2204, Shui On Plaza,333 Huai Hai Zhong Road,

Shanghai, 200021,P.R. China

3332204

Tel: +86 (21) 6385 2023Fax: +86 (21) 6385 2381

[email protected]

ShenyangRoom 20-10.

Office Tower 1, ShenyangRich Gate Plaza,

No. 7-1 Tuanjie Road,Shenhe District

Shenyang 110001,P.R. China

7-1

20-10Tel: +86 (24) 2334 2428Fax: +86 (24) 2334 2428

[email protected]

TianjinMagnetic Plaza, Building 17,

Room 15A17,Junction of Binshui West& Shuishang East Road,

Nankai district, Tianjin,300381, P.R. China

1715A17Tel: +86 (22) 2374 1122Fax: +86 (22) 2374 1122

[email protected]

EURObiz is published bimonthly by

the European Union Chamber of

Commerce in China, and is distrib-

uted free to all Chamber members.

All material is copyright2011 by

the European Union Chamber of

Commerce in China. No part of

this publication may be reproduced

without the publishers prior

permission. While every effort has

been made to ensure accuracy, the

publisher is not responsible for any

errors. Views expressed are not

necessarily those of the European

Union Chamber of Commerce in

China.

Chief EditorSteven Schwankert

Art DirectorVincent Ding

Publications ManagerVicky Dong

Marketing &Communications Manager

Jessica Schroeder

For European Chamber

Membership andAdvertising inEURObiz:

Member Relations &Sponsorship ManagerFernando Cutanda

Tel: +86 (10) 6462 2066ext. 31

Fax: +86 (10) 6462 2067fcutanda@

europeanchamber.com.cn

Advertising &Sponsorship Coordinator

Betty YinTel: +86 (10) 6462 2066

ext. 23byin@europeanchamber.

com.cn

JOIN THE EUROPEANBUSINESS CONVERSATION

IN CHINAAdvertise in EURObiz

Reach 24,000 senior Europeanand Chinese business

executives, governmentofficials and

over 1,600member companiesof the EU Chamber nationwide

with the only publicationdedicated to covering

European business in China.

To place your ad,please contact:

Fernando CutandaMember Relations & Sponsorship Manager

Tel: +86 (10) 6462 2066 ext. [email protected]

Betty YinAdvertising and Sponsorship Coordinator

Tel: +86 (10) 6462 2066 ext. [email protected]

European Chamber Chapters:

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In December, China will celebrate 10 years of membership in the World Trade Organiza-tion. Great strides have been made as a result of Chinas accession, including the lockingin of much liberalisation made in the lead-up to Chinas signing as well as compliance tovarious commitments post-accession such as tariff reductions, the abolishment of importquotas and great strides in transparency and consultation. In many ways, the Chamber ex-ists because of this historic agreement: the 51 founding member companies of our Cham-ber decided to organise in order to assist European business reach its full potential in thisdynamic market, to ensure a level-playing eld for all companies and to monitor Chinascompliance with its WTO obligations.

That this initiative was necessary and timely is proven year after year by the recommenda-tions in our yearlyPosition Paper. This year the paper called for dramatic shifts in order forChina to meet its ambitious goals.

In recent years, the momentum towards liberalisation has slowed and ownership restric-tions as well as compulsory technology transfer remain in place in key industries, includingin sectors where China has now emerged as a global market leader. Licensing difcultiesthat reduce the ease of market access, unpredictable laws and regulations and discrimina-tory subsidies also continue to prevail. The European Chamber supports statements madeon more than one occasion by Premier Wen Jiabao, that companies registered in Chinaand according to Chinese law are Chinese companies. Full implementation of this concept,including at the local level, will help make great strides towards improving fair and healthycompetition for all companies operating here, domestic and foreign, private and public

alike. Further domestic reforms and opening up are required to make these shifts and arenecessary to bring about the new drivers of growth that China has identied in the 12thFive-Year Plan.

In September and October thePosition Paperwas presented in 10 European Member Statesby a delegation of 22 people from the Chambers Executive Committee as well as Chairsfrom various Working Groups. As the voice of European industry in the country contrib-uting most to post-crisis global growth, our messages aimed at developing a focused andaligned approach from all European actors towards China were listened to attentively inthe European Commission and Parliament, as well as in the business communities and rel-evant ministries in the capitals.

Before embarking on that trip, the Chamber paid a courtesy visit to Chinas Vice Ministerof Commerce, Zhong Shan, to present to him thePosition Paperand to highlight its main is-

sues. In the coming months, much more dialogue based on this document with all relevantministries will be conducted as a Chamber priority.

The year-end promises to be challenging for many reasons: the global nancial crisis, cur-rently at the focus of attention in Europe, has immediate consequences for China. The EU-China Business Summit had to be postponed, and exports to Europe as well as incomingforeign direct investment from Europe have slowed. Given the importance of the Europeanmarket, China is expected to take an active role in addressing this crisis. By doing so, it willmaintain trade and capital ows, which is ultimately in Chinas interests, as well as the in-terests of European companies active in this market.

I look forward to continuing to serve you in 2012. I wish you a pleasant holiday season, andprosperity and success in the new year.

Ten Years of WTO

Mr. Davide CucinoPresident of The European UnionChamber of Commerce in China

November/December 2011 EURObiz 9

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EUROPEAN CHAMBERLOBBYING HIGHLIGHTS

European Tour

Brussels Circuit (19th 23rd September)

Testament to both the increasing significance being

placed on trade relations with China from both EuropeanUnion and Member State ofcials, and to the rising valueafforded to the European Chambers annual PositionPaper, the level of access to government ofcials enjoyedby the European Chambers European Tour delegationwas the highest in its 11-year history.

The Chamber sent a delegation to 10 different European

capitals, five of which for the first time. In addition to

Brussels, Paris, Berlin, London and Rome, EuropeanChamber delegates also visited The Hague, Prague,Athens, Copenhagen and Warsaw. Of these 10 cities,the largest delegation visited Brussels for meetings withgovernment counterparts in the European Commissionand the European Parliament in what has colloquiallycome to be referred to as the European ChambersBrussels Circuit.

The European Chamber took a delegation of 22members to Brussels. These included the PresidentDavide Cucino; Vice Presidents Piter de Jong, JensRuebbert, Miroslav Kolesar and Meiwei Cheng; StatesRepresentative Jens Eskelund; Chapter Chairman PaulSives; and seven Working Group Chairs, four WorkingGroup Vice-Chairs and two Advisory Council members.Four secretariat staff also accompanied the delegation,including Secretary General Dirk Moens. The delegationsworking group experience covered 17 different workinggroups: Construction; Intellectual Property Rights (IPR);Healthcare Equipment; Cosmetics; Renewable Energy;

Information and Communications Technology (ICT);Information Security; Retail and Distribution; Aviation;Aerospace; Petrochemicals, Chemicals and Refining;Rail; Maritime Transport; Logistics; Banking; ConsumerFinance and Non-Banking Financial Institutions; andPrivate Equity and Strategic Mergers and Acquisitions.

The access enjoyed in Brussels was not only impressive in

terms the numbers of high-level meetings held, but alsoin terms of the breadth and scope of the departments vis-ited and issues discussed. Of the 30 government meetings

with European Union ofcials in Brussels scheduled over

EURObizLobbying Report

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Commissioner Level MeetingsMeeting with the European Commissioner for Trade, Karel De Gucht

Meeting with the European Commissioner for Information Society and Media, Neelie Kroes

The meeting with Trade Commissioner De Gucht on Monday, 19thSeptember, was the European Chambers second meeting with Com-missioner De Gucht in two months and the first of two meetingswith him in Brussels. It was also the second meeting with DG Tradein a day, as in the morning a group of European Chamber delegatesmet with Commissioner De Guchts Director-General, Jean-LucDemarty, in a meeting that covered various working group concernsand was notable for Mr. Demartys comment that he planned toread the Position Paper from cover to cover prior to his upcomingmeetings with his Vice Minister counterparts in MOFCOM and theEU-China High-Level Economic Dialogue (HED), and for his state-ment that any investment treaty with China should also cover marketaccess issues. In the meeting with Commissioner De Gucht, in addi-tion to specic working group issues, discussion also went into detail

on topics including Chinas Market Economy Status, the currentstatus of Chinas non-performing loans, decreasing EU investment

Lobbying Report EURObiz

the course of the four-day visit, the Chamber delegatesmet with one European Commission Vice President, fourCommissioners and two Director-Generals. In addition,the delegation also held a lunch meeting with the Ambas-sador of the Peoples Republic of China to the EU and 12meetings with industry associations.

Within the meetings, some general and horizontal top-ics repeatedly arose. These issues -- including matters asdiverse as public procurement, Chinas desire for marketeconomy status, standardisation, research and develop-ment cooperation and participation, and the impact of theeconomic difculties in Europe on the Chinese economy

-- helped shed further light on the current priorities and

primary considerations of European policy-makers. How-ever, the point that was iterated on the most occasions --and by varying levels and differing Directorate-Generalswithin the European Commission -- was the importanceand instrumentality of the Position Paper in assisting Eu-ropean ofcials frame governmental trade policy strategy

with China. In recognition of the level of regard affordedto the Position Paper as a uniquely credible report ofEuropean business interests in China, conversation in thevast proportion of meetings focused almost exclusively onelucidating issues and on discussing recommended pointsof action that the ofcials could and should take regard-ing how to tackle the various concerns outlined within thePosition Paper.


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EURObiz Lobbying Report

Meeting with then European Commissioner for Environment, Janez Potonik

Meeting with the European Commissioner for Taxation and Customs Union, Algirdas emeta

The meeting with Commissioner emeta on Monday, 19th September, led by European Chamber President DavideCucino, was the rst meeting between the Chamber and the Commissioner. During the meeting, the Chamber was in -formed that there is no formal dialogue between China and the EU on tax matters because there is no support for sucha dialogue from the State Administration of Taxation or other Chinese tax ofcials. Regarding the legislative process for

changes in Chinas tax laws, Commissioner emeta stated that the EU will push China to follow WTO GATT require-ments including increased notication periods.

The meeting with European Commission Vice President Kroes constituted the highest-level meeting held during theEuropean Tour. As Commissioner for Information Society and Media, the meeting topics discussed with Vice PresidentKroes were more focused and industry-specic than those issues covered in the meeting with Commissioner De Gucht.

On the concerns of the Chambers ICT Working Group, which included topics such as unequal access to both stand-ardisation committees and Chinese government-funded ICT R&D projects, Commissioner Kroes stated that she would

work jointly with DG Research and Innovation Commissioner Quinn to try to tackle R&D concerns because mutual

access for researchers is a must, and that she would work with the Chinese on questions of standardisation and EU bestpractices when she visits China in early 2012. Regarding the Chambers concerns regarding Chinas restrictive regula-tory approaches to issues of information security and, in particular, commercial encryption technologies, Vice PresidentKroes promised that there is still hope for this issue and that it would continue to be raised at high-levels with Chinesegovernment ofcials. The Chamber was also informed that the European Commission and China are currently discuss -ing opportunities to cooperate with China in a meaningful dialogue on cyber-security issues. Finally, Vice PresidentKroes expressed her support and agreement with the European Chambers suggestion that a dialogue between DG INF-SO and the Chinese Ministry of Health on issues of healthcare IT and e-health would be benecial for the development

of global policies and fostering interoperability in the relatively young industry sector.


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Meeting with the European Commissioner for Economic and Financial Affairs, Olli Rehn

In the meeting between Commissioner Rehn and the European Chamber delegation led by President Cucino, EuropeanChamber nancial services representatives briefed Commissioner Rehn on recent developments in the nancial services

sector in China and entered into an interesting discussion on the European debt crisis and its implications for trade and

investment relations with China.

Member State Capital Tour (24th September 5th October)

The effectiveness of EU trade policy with China has in the past been undermined by an approach that has been frag-mented and uncoordinated both within the EU and between its Member States. As a result, the European Commissionhas in recent years endeavoured to develop a harmonised policy towards China, including the development of priorityissues and the outlining of common lines of approach for trade policy dialogues with China. The European Chamberwelcomes such a move as being necessary to improve the effectiveness of European interaction with China and to reducethe potential for Europes position to be weakened by internal division. With this in mind, this years European Tour vis-ited more European Member State capitals than ever before to assist with this aim by promoting key messages to leading

stakeholders at the Member State level.

The nal Commissioner level meeting of the Brussels Circuit was held on Wednesday, 21st September with Environ-ment Commissioner Potocnik. The European Chamber delegation, led by President Cucino outlined a number of issueswithin the environmental sector to Commissioner Potocnik, including major renewable energy issues, in particular in the

wind energy sector. These included the current grid bottleneck situation, as well as issues of discrimination in this sec-tor, such as the recent joint venture requirements for off-shore wind farms and the fact that foreign companies can never

win any government concession projects in this area. Other issues raised included Chinas concerns regarding EU-ETS

for aviation, concerns about Chinas ability at the local level to enforce environmental regulations for ground transport,as well a lack of clarity how China will be able to meet with ambitious and binding targets they have set for emissionsreductions. Commissioner Potocnik was very interesting in these topics, but noted that the European Commission needsto improve understanding of the situation in China. He noted that the next HED will likely feature a discussion topic oneco-design and that the European Commission would like to see better coordination amongst Chinese ministries on en-vironmental and energy issues.


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EURObiz Lobbying Report

RomeEuropean Chamber President Davide Cucino led a three-person delegation to Rome on Thursday, 22nd September,to meet with the Italian Ministry of Foreign Affairs and toparticipate in a large-scale Position Paper presentation tothe Italian business community that had been organised inadvance by the European Chamber together with Conn-dustria.

LondonAlso on the 22nd September, a European Chamber del-egation visited London. Led by European Chamber Vice-President Jens Ruebbert, the five-person deputation alsotook part in a large-scale Position Paper presentation tothe business community organised in advance by the Eu-ropean Chamber in cooperation with the Confederationof British Industry. In addition, a United Kingdom Gov-ernment Roundtable was attended, as well as meetings

held with the United Kingdom Trade and Invest, the Chi-nese Ministry of Commerce mission to Great Britain andCity of London representatives.

The HagueThursday 22nd September was also the date when Eu-ropean Chamber Vice-President and Shanghai ChapterChairman, Piter De Jong visited the Hague for the rst-

ever European Chamber meeting with government rep-resentatives of the Netherlands on Dutch soil. Questions

on how to approach China, what the role of the mem-ber states should be regarding engagement with China,Market Economy Status and bilateral trade treaties werediscussed with Simon Smits, Director-General of the Min-istry of Economic Affairs, Agriculture and Innovation.

PragueOn what was a busy day for the European Chamber, VicePresident Miroslav Kolesar ew to Prague on 22nd Sep-tember to visit Czech Republic ofcials for the rst time

on a European Tour. Over the two days spent in Prague,Vice President Kolesar met with both the Chinese Ambas-sador to the Czech Republic as well as the Chinese MOF-COM mission. He also represented the European Cham-ber in a Position Paper presentation organised in advance

with the Czech business community.

CopenhagenEuropean Chamber States Representative Jens Eskel-und visited Copenhagen on Thursday, 29th September,in what was again the first visit on a European Tour toDenmark. During his visit, Mr. Eskelund presented thePosition Paper to the Danish Ministry of Foreign Affairs.In the meeting with Mr. Soren Kelstrup, Head of Depart-ment/Ambassador for Trade Policy, discussion on theparticular issues facing Denmark in a China trade contextwere raised. The Ministry also stated strong support for

aligning member state messaging to China; and encour-

aged the Chamber to help to this regard by recordingknown instances of misalignment. Finally, the Ministry in-vited Mr. Eskelund to speak at the Ministrys next GlobalPublic Affairs meeting.

ParisOn 30th September, President Emeritus Jacques de Bois-sson led a delegation of ve European Chamber mem-bers to France, including member of the Shanghai Board,Charles Edouard-Boue, and three Working GroupChairs. In Paris, they met with the Ministries of Foreignand European Affairs, and also held a Position Paperpresentation with approximately 50 representatives of theFrench business community.

WarsawFollowing a week back in Beijing after his European Tour

visit to Rome, President Cucino took advantage of the

Chinese National Day holidays to continue the EuropeanChambers mission, this time visiting Warsaw. In the Pol-ish capital, he held meetings with both the Polish Ministryof Foreign Affairs and the Polish Ministry of Economy.He also represented the Chamber at a large-scale PositionPaper presentation to the local business community incooperation with the Polish Agency for Enterprise Devel-opment and at a roundtable with the Polish Institute ofInternational Affairs.

BerlinThe penultimate destination on the European Tour wasBerlin where Chamber Treasurer, Andreas Feege led athree-person delegation over the course of 4th and 5thOctober. During the visit, Andreas Feege gave a PositionPaper presentation to the German business communityin an event organised together with the Association ofGerman Chambers of Industry and Commerce (DIHK),which was attended by representatives of German Busi-ness Associations, the German Ministry of Foreign Affairs,the Ministry of Economics and Technology and leadingGerman multinational companies. The European Cham-ber delegation also held a meeting with His Excellency WuHongbo, Chinas Ambassador to Germany, during whichAmbassador Wu stressed the importance of aligning in

issues of common interest like environmental protection,IPR protection and the need for both sides to resist tradeand investment protectionism.

AthensAlso for the rst time and again led by President Cucino,

the European Chamber was represented in Greece onthe nal destination of the European Tour where another

Position Paper presentation with the business communitywas held in Athens, organised in advance by the EuropeanChamber in cooperation with the Athens Chamber ofCommerce.


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Chinese Lobbying Highlights

Meeting with the Mayor of Chongqing, Huang Qifan

Consultative Roundtable with the Mayor of Nanjing, Ji Jianye

Although the months of September and October tend tobe the most European-oriented months of the calendar

year owing to the European Tour, the Chamber sti ll

continues with its primary lobbying focus directly withChinese ofcials. In the days leading up to the release of

the Position Paper and in the weeks ensuing until the thirdweek of October, the European Chamber submitted 11sets of regulatory comments to Chinese ofcials and held

24 Chinese government meetings, including two at theMinisterial level.

In view of the fact that the European Chamber formallyestablished an office in Chongqing recently, EuropeanChamber President Davide Cucino and Secretary-General Dirk Moens requested a meeting with the Mayor

of Chongqing Huang Qifan. During the meeting on 25thAugust, numerous discussion points were raised, includingChongqings desire to further invest overseas and how theEuropean Chamber could assist with further attracting

investment to Chongqing. Mayor Huang was interested inissues elaborated within the Position Paper and gave hisfull support to the European Chambers decision to openan ofce in Chongqing. Indeed, Mayor Huang promised

that the Municipalitys government will attend the openingceremony of the Chongqing office later in the year andwill continue the dialogue with the European Chamberinto the future to develop good cooperation in the region.

On 15th-16th September, the European Chamber wasinvited by the Nanjing Municipal Government to supportthe 2011 Nanjing Mayors Consultative Roundtable,which was focused on the development of Nanjingslogistics industry. The European Chamber delegationwas led by Nanjing Board Member Carlo DAndrea

and was represented by nine logistics-related member

companies. Prior to the roundtable meeting, CharlesWang, a Director at the China Development Institute, wasinvited to speak by the Chamber to give a keynote speechas a representative of the City Logistics Projects, whichis a project that involved numerous Chamber membercompanies.

Meeting with the Vice Minister of Commerce, Zhong Shan

Two days prior to the release of the Position Paper on 6thSeptember, MOFCOM Vice Minister Zhong Shan ac-cepted a meeting request from the European Chamber.The meeting was organised as a courtesy visit to discussEuropean Chamber concerns and messaging prior to the

release of the Position Paper. European Chamber Presi-dent Davide Cucino; President Emeritus Jacques de Bois-sson; European Chamber Vice Presidents Jens Ruebbertand Miroslav Kolesar; European Chamber Treasurer An-dreas Feege; and Secretary-General Dirk Moens attendedthe meeting with Vice Minister Zhong and relevant Direc-

tor-Generals. During the meeting, the European Chamberpresented the Position Paper Executive Summary, includ-ing the two tables of 10 policy improvements over the lastyear and the 10 examples of existing major discriminatory

policies against foreign-invested enterprises. Other issues

discussed included the European Chamber EuropeanTour, as well as the EU-China Summit. The meeting wasvery cordial and follow up meetings with relevant Direc-tor-Generals were promised for specific Working Groupconcerns.



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Executive Perspectives EURObiz

With 2011 moving towards a close, European industry in China isexperiencing a dynamic situation that is both challenging and re-warding. The global economy remains slow, with the European Un-ion sliding deeper into crisis in the last quarter of the year. Chinaseconomy remained robust, although signs of slowdown, initiated inpart by government policy designed to ease inflation, has started totake effect.

This year also saw the initiation of Chinas 12th Five-Year Plan, in-dicating a new direction for the nations economy, as it transitionsaway from manufacturing and exports and focuses on services fora domestic economy. The Plan also places significant weight onenvironmental protection and sustainability, as part of an empha-

sis on improving not just the economic well-being, but the overallquality of life of Chinas citizens.

While the European Chambers Business Confidence Survey 2011indicated European businesses in China foresee greater regulatoryuncertainty during the coming two years, at the same time a sig-nificant majority of the same firms indicated both greater revenueand profit in 2010, indicating both the difficulty and opportunity thatthe market here continues to present.

EURObizs Steven Schwankert sat down with leading executivesbased in the two regions to discuss the state of European Businessin China for their perspective on the current situation, and someinsight into what may be expected in the short-term.

EXECUTIVE

PERSPECTIVES:Discussions of EuropeanBusiness in China


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EURObiz (Eb): Tell us about thenature of ABBs business in Chi-na.

Claudio Facchin (CF): ABB hasbeen working with China for morethan 100 years. As one of the early

birds, ABB has built more than 33local companies since 1992, a full-fledged business formed of R&D,supply chain management, manufac-turing, service and engineering. ABBis dedicated to providing power andautomation technologies and solu-tions to increase energy efciency andproductivity for utility and industrycustomers who are key players inpower generation, power transmis-sion and distribution, transportation,chemicals, oil and gas, minerals, pulpand paper, automobile, intelligent

building construction.

Eb: Is the EU-China businessrelationship growing in impor-tance? Why or why not?

CF: Yes, absolutely. The EU-China

business relationship is obviouslygrowing in importance, with a totaltrade well above EUR 400 billion in2010, with the China share in tradeof goods approaching 15% of globaltrade, and with the strong push fromChina to increase the value added athome, Europe and China must finda win-win partnership. The ongoingdialogue and cooperation in manyelds including energy efciency andenvironmental protection, renewablesand industrial productivity are a goodexample. We are enthusiastic about

the opportunities such partnershipwill generate for both parties, Chinaand EU.

Eb: What is the biggest businessissue that the two sides face?

CF: To my view, it is trust. And toovercome this hurdle there is onlyone way: is to engage in a transparentand concrete dialogue in those criti-cal areas that have been highlightedalready many times. If I look at ABB,experience and success in China isabout state of the art technology,great customer base, excellent poolof talents as well as excellent relation-ship with local partners.

We have more than 20 joint ventureswith local partners and the key suc-

ABB (China) Ltd.With a century ofhistory in China andthe developmentof more than 33local companiessince entering themarket in 1992,ABB has becomeone of the mostinfluential marketplayers here. ABBGroup Senior VicePresident andPresident of ABBNorth Asia Region

Claudio Facchintalks with EURObizabout industrialupgrading in China.

EURObiz Executive Perspectives

Claudio Facchin


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cess factors are trust and respect, onboth sides. Foreign direct investmentin China is usually an easy processthanks to the government open poli-cy. However, despite the right tone setat the top, multinational corporations

still face challenges such as marketrestriction and transparency of therules and regulations in few areas. Icould see the mutual understandinghas improved a lot now, after Chinamaking strong efforts through regula-tions and counterfeiting actions, but alot of hard work is still in front of us.

Eb: Where are the best opportu-nities for European industry inChina?

CF:Help China to improve energyefficiency and emission reduction,environmental protection, industrialproductivity and safety, which havealso direct impact on improving thelife and work quality of the people.

Eb: How can Europe make itselfmore attractive for Chinese in-vestment? Or what would en-courage greater investment inChina?

CF:In both cases, we should encour-

age and support Chinese stakehold-ers to deepen their understandingof the EU system, which is ahead ofthe Chinese system in terms of levelplaying field, transparency and ruleof law. This can take place at the gov-ernment, business and educationallevel. At the same time we need toleverage further the existing EU foot-print in China as a growth platformfor the EU-China partnership.

China has made signicant contribu-tions to the world economy and madehuge improvements in the countryduring the past two decades. Theseachievements are unprecedented anddeserve a lot of respect. We shouldalways bear in mind that being a con-tinent like country, China surely hasits share of the issues, just as everycountry does.

The EU can position itself as a part-ner to support Chinas plan to shiftinto a sustainable economic growthmode, this is certainly an attractive

scenario for China and would en-courage the partnership on an equalstand.

To attract Chinese investors weshould also clearly demonstrate what

good investment opportunities lay inEurope. One suggestion would be forEurope to focus on the existing andwell developed Chinese partners, withwhom we already gained experiencethrough our successful joint ventures.

Eb: How will the current issueswith the Euro affect the EU-Chinarelationship?

CF:The turbulence in the Eurozoneand the increasing risk related tofinancial system and consequentlythe currency is certainly triggeringconcerns from Chinese investmentsperspective. In addition, China needsto deal with an over-exposure of itsinvestments in U.S. dollars, so the riskis for Europe to lose attractiveness vis-a-vis other markets such as BRICSand Asia Pacic.

Eb: What do you think is thegreatest misunderstanding ofChina in Europe?

CF:Once more, it is the lack of trust.Relationship is built on trust, respectand through long-term efforts, and itshould be carefully protected always.Issues do occur from time to time. Ifthey are not responded to efciently,then they are likely to affect the re-lationship. In my opinion, all issuescan be discussed and resolved byincreasing mutual understanding andboth sides should concentrate on theopportunity of such a partnership,rather than the risks.

Eb: Conversely, where do youthink Europeans mostly misun-derstand China?

CF:First, we take China as a singleentity, one homogenous country, rath-er than a large continent. We need tolearn about the differences betweenthe Chinese from the west to the east,from the north to the south, from thepast to present, from the rich to thepoor.

Second, we need to look at the Chi-nese stakeholders as our peers; thisis a cultural shift and a different per-spective from just eight to 10 yearsago.

Eb: What kind of clients doesABB serve in China? How doesthe business differ between Chi-nese and MNC customers?

CF: We serve customers who are keyplayers in sectors including powergeneration, transmission and distri-bution, transportation, oil and gas,minerals, pulp and paper, automo-bile, shipbuilding, intelligent buildingconstruction, almost all industries andmarket segments. We are the leadingplayer with the state of the art tech-nology and complete product portfo-lio in our industries, and we have en-ergy efciency, industrial productivityand power grid reliability built in thecore of our products, compared withother companies.

The vast majority of our customersin China are Chinese enterprises (pri-vate or state-owned enterprises) andour focus is on the domestic market.In that sense there is no substantialdifference between Chinese and

MNC customers. At the same timewe are in an excellent position to sup-port all our customers in their overseeexpansion, a development that repre-sents an additional growth opportu-nity for well established companies inChina

Just take a look at companies likeSinopec; they are comparable to anymultinational company today.

Eb: Anything you would like toadd?

CF: If I can stress one single point,that is: Europe needs China and theChinese enterprises to support growthin Europe, as much as China needsEurope to shift its economy into thesustainable path.

The win-win partnership I mentionedbefore should be our goal, for thebenets of the Chinese and Europeanpeople.



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EURObiz (EB): How does CRIFapproach its business here inChina?

Enrico Lodi (EL):CRIF is a globalcompany specialising in the develop-ment and management of credit re-

porting, business information and de-

cision support systems, operating overfour continents (Europe, America,Africa and Asia) and serving custom-

ers in 40 countries.

CRIF GroupWorldwide supportsmore than 1,800banks and financial

institutions, over25,000 businessclients andprovides reportsand informationon over 150million companiesworldwide. EnricoLodi, GeneralManager of CRIFs

credit servicesbureau, talked toEURObiz about therising need for creditreporting in China.

CRIF

Enrico Lodi


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CRIF also works with local govern-ments and central banks to improvea countrys financial systems, as asound basis for development of cor-porations and Small and Medium-sized Enterprises (SMEs).

Since 2008 CRIF has been operat-ing in China through Huaxia CRIFChina, a joint venture with HuaxiaInternational Credit Group, offeringconsumer loan management, debtcollection, decision support solutionsand pre-employment screening to theChinese domestic market.

In addition, in 2011 CRIF establishedCRIF Beijing to provide credit riskmanagement solutions to Chinese re-

tail banks, consumers and automobilenance companies. With ofces nowin both Beijing and Shanghai, CRIFprovides decision support systemsand software solutions to help localbanks and financial institutions todevelop more efcient and innovativeretail lending procedures and pro-cesses; from customer targeting andacquisition, to portfolio managementand debt collection. Thanks to CRIFservices, Chinese financial institu-tions are able to respond faster andmore effectively to the challenging

and ever-changing demands of thecustomer, the market and regulatorybodies.

CRIF leverages on its internationalexperience in the development ofdecision support systems for creditrisk management and marketingstrategies, and combines this with lo-cal know-how in order to meet thespecic needs of the Chinese market.


EL: The main issue is: will the fairenforcement of reciprocal businessrules be able to create real win-winopportunities?

Eb: From your perspective then,where are the best opportunitiesfor European industry in China?

EL:As far as CRIF industry is con-cerned, the biggest opportunity isrelated to the shortening time to

market. Chinese nancial institutions

could take advantage of solutionsalready implemented in Europe tosolve similar problems.

Specifically, the tightening of creditpolicies for SMEs and small business-

es require the financial institutionsto change focus from the volume ofcredit to the quality of credit, andthese are key factors where CRIFsupports local institutions and localbanks.

Finally, as in China the consumercredit market is growing rapidly andoffers challenging opportunities forfurther development, CRIFs stra-tegic decision to position itself inAsia in the fields of integrated and

advanced analytics, IT solutions andconsulting services, supporting banksand nancial institutions in customeracquisition and credit portfolio man-agement.


EL:As mentioned earlier, the fairenforcement of reciprocal business

rules is the starting point. Addition-ally, an open-minded approach asfar as knowledge transfer is con-cerned. Many European companieshave strong know-how to share withChinese companies, which have tounderstand their cooperation for thelegalisation of such know-how is partof the success of the deal. This is es-pecially true as far as our industry isconcerned.


EL:The common opinion in Europeis that China is an incumbent com-petitor and vice-versa. This is theview of people not having had directcontact with each other. We stronglybelieve that this is not true: Chinaand Europe are complementary;there is room for enhancing coopera-tion in a fair way.

Eb: What kind of clients does

CRIF serve in China? How does

the business differ between Chi-nese and MNC customers?

EL:CRIF provides services mainly toretail banks and nancial institutions,supporting them in managing the

credit lifecycle, from customer acqui-sition to loan underwriting, to portfo-lio management and debt collection.Common retail financial productssuch as home loans, credit cards andoverdrafts can then be managed usingCRIF solutions.

The MNC presence in this indus-try is still focused on consumer andautomobile finance, while most in-ternational banks are either focusedon corporate banking or reinforcing

their presence in the retail segmentbeing (minority) shareholders of localcommercial banks.

Eb: CRIF has had a long collabo-ration with several central banksin emerging economies. Pleasetell us how those relationshipsdeveloped, and how you work to-gether with them?

EL: CRIF is the largest credit bureauin continental Europe and runs creditbureaus directly, or provides the tech-

nology central banks in more than 10countries around the world includ-ing Asia. CRIF is also a member ofseveral credit reporting industry as-sociations, and is then able to provideconsultancy and knowledge transferto central banks of emerging econo-mies in the area of credit reportingand credit bureau management.

In China, Peoples Bank of Chinamanages the credit bureau and hasbeen able to establish very success-

fully the national credit reporting sys-tem in an extremely tight timeframe.CRIF, both as a company and as amember of industry associations,continues to promote knowledgetransfer and information exchangewithcentral banks.



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EURObiz (EB): Please tell usabout the Tianjin chapter of theEuropean Chamber. How manymembers do you have? What aresome of the major companiesparticipating?

Eric Bouteiller (EB):The TianjinChapter is a relatively young organi-sation as it was established in 2005,but it is one of the most dynamic. Wereached 100 members a few monthsago. The Chapter is led by a boardthat is elected every year. It is a small

team of individuals strongly involvedin the local life and with a wide geo-graphical representation (four Euro-pean countries among five people).We have very big corporate nameslike Airbus and Siemens, but alsomedium-sized companies like Goglioand Ipsen Pharma. One key of oursuccess is to have built a tight teamthat makes fast decisions togetherensuring that we join all major eventswe organise in Tianjin. On average,we have four to ve events per month,which can be a challenge to partici-

pate in all of them when you knowour very heavy professional workload.Eb: Why are these companies es-tablishing a presence in Tianjin,what is the advantage?

EB: Tianjin has many strong ad-vantages from an investment pointof view: remarkable transportationinfrastructure; strong local market;regulators that are very supportive tobusiness; proximity of Beijing withoutits cost. There are many more rea-

Beaufour-Ipsen (Tianjin)Pharmaceutical Co., Ltd.

Eric Bouteiller

Mr. Eric Bouteillerserves as theChairman andGeneral Managerof Beaufour-Ipsen (Tianjin)PharmaceuticalCo., Ltd. He is alsoa former chairmanof the EuropeanUnion Chamberof Commerce inChinas TianjinChapter. In addition,Mr. Bouteiller

servesHe sharedwith EURObizhis insightsinto the citysEuropean businesscommunity, and itschallenges, charmsand opportunities.


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sons, but probably the most impor-tant is a well trained workforce that isquite stable by China standards.

Eb: How does Tianjin compare toits neighbor, Beijing?

EB: The history and nature of thetwo cities are very different. TodayBeijing is the capital of the countryand benefits from a level of invest-ment that Tianjin cannot match. Buta century ago, the picture was not thesame and Tianjin was more devel-oped than Beijing, while the centralgovernment was, at that time, forbid-ding foreign ventures in the heart ofthe empire. Tianijn was also saferthan Beijing and that is why when

you walk in the old quarters of thecity it is like walking in a history bookof China: many important peoplelived in Tianjin.

Today, Tianjin has capitalised on itsexcellent location benefiting fromits transportation infrastructure butalso its proximity to Beijing. Tianjinis now an industrial powerhouse spe-cialised in manufacturing, shippingand logistics. If you are looking forbig manufacturing investment, Tian-jin is the best candidate in terms of

availability of land, quality workforceand cost. Beijing is more suitable forrepresentation and the service indus-try.

Eb: What is the attitude of themunicipal government towardsforeign investment and foreignbusiness, especially Europeanbusiness?

EB: The municipal government isvery keen to attract foreign invest-

ment. With the Binhai New Area,you have a vibrant city that is com-parable to Shenzhen. Of course, noteverything is rosy, but the mindset ofthe local ofcials is positive and theyare looking for pragmatic solutionsfor companies to invest here.

Is there a specic interest or supportfor European companies? I do notthink so. De facto, the most importantinvestors are Korean and Japanesefor obvious geographical reasons. Butthe doors of the various government

agencies are always open.

Eb: For purposes of investmentand business, would you con-sider Tianjin to be a first-tier orsecond-tier city?

EB:In terms of population (13 mil-lion according to the recent census) ormarket size, Tianjin is clearly behindthe rst-tier cities like Beijing, Shang-hai or Guangzhou. But it is alreadyamong the biggest of second-tier cit-ies. Also the growth of the economyfor the last two years has been therst in China and Tianjin is catchingup with rst-tier cities.

You can look at this issue from a

different angle. In the case of mycompany, Ipsen Pharma, we havechosen Tianjin as the location forour headquarters in China, since ourbeginning of operations here in 1992.Currently this affiliate is the secondof our group due to several factors:aggressive strategy and careful man-agement of resources, but also be-cause we manage our whole nationaloperations from Tianjin. In brief,we are more in tune with real Chinathan by having our ofce in the CBDof Beijing of Shanghai.

Eb: What are some of the chal-lenges that companies face inTianjin?

EB:Basically, we face the same issuesin Tianjin as in the rest of China: thedifficulties to manage strong growthin the long run, increasing costs, butalso changes of regulations and newtaxes. The Business Conf idence Survey[www.europeanchamber.com.cn/view/media/publications] is a good

summary of what we are facing.There are also more specic issues toTianjin. With its strong economic de-velopment, this city is facing a grow-ing pressure on the citys transporta-tion infrastructure. Hardware hasbeen significantly improved over thelast few years in terms of connectionswith Beijing and other economichubs in the region. Tianjin has beenthe first city to benefit from a veryreliable high-speed train. But more isneeded not only on the infrastructure

side but also on the soft side.

Eb: Tell us about the quality oftalent in Tianjin. Is there an ad-equate supply available locally?

EB:Tianjin has a huge talent pool atthe workshop or management level.There are a lot of high quality edu-cational institutions. And the strategyfollowed by local ofcials is dynamic.For example, with the creation ofan aeronautic industry in Tianjin,several related universities have beencreated to support the long-term sup-ply of talents.

But it is true that for some very spe-cific positions, at the national level,

you have to identi fy the expert iseyou ne ed in Be ij ing or Sh anghaiand propose to candidates a spe-cific package to move to Tianjin.

Eb: What dont most people knowabout Tianjin?

EB: The level of knowledge aboutTianjin in Europe is very low. It is im-portant that ofcials continue to builda better image for the city. The factthat the World Economic ForumsSummer Davos happened here last

year is very important.

After its success in manufacturing, thecity starts to launch large-scale inter-national business events and exhibi-tions. A visit to the Meijiang Exhibi-tion Center is compulsory.

Tianjin is also trying to capitalise onits rich history. A tour of the formerconcession area or a Haihe rivercruise are now a favourite of any visitto the city.

Eb: How easy is it for a foreignnational to live in Tianjin, howcomfortable?

EB:You can nd all the basic infra-structure foreigners need from goodinternational schools to English-speaking clinics. But it is quite dif-cult to nd natural space nearby thecity or high-level cultural entertain-ment. Beijing is in sharp contrast. ButTianjin is slowly improving and nowyou nd some good places.


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EURObiz (Eb): Please describeRoland Bergers work here inChina.

Charles-Edouard Boue (CEB):Roland Berger Strategy Consultants,founded in 1967, is one of the worldsleading strategy consultancies. We en-tered the China market in the 1980sand have established our footprintsolidly. Of almost 300 consultants inChina, 90% of them are Chinese,providing our expertise of local andinternational markets to our clients,and up to 70-80% of our clients areChinese companies, public or private.With this fast pace, Roland Berger is

very condent to bring more value to

the China market.

Eb: Is the EU-China businessrelationship growing in impor-

tance? Why or why not?

CEB: Yes. Europe is the largest trad-ing partner of China and interde-pendence between the two is growingfast. The trade relationship repre-sented a volume of EUR 1.75 billionin 1975 when China and Europe re-established diplomatic relations, whiletoday the gure is EUR 240.4 billion!In 1975, there was no European in-vestment in China, while today morethan 20,000 European companies op-

erate in China. In terms of tourism,

last year, almost two million Chinesetourists visited Europe.

Eb: What is the biggest business

issue that the two sides face?

CEB:Finding a win-win situation as alack of balance develops on the tradeand investment side.


CEB: First, Chinas 12th Five-YearPlan has given a clear direction forthe countrys future development, it

is especially clear about the oppor-

As one of the worldslargest firms of itskind, Roland BergerStrategy Consultants

has maintaineda presence inChina since the1980s. Charles-Edouard Boue,the companysPresident for Asiaand member of itsGlobal ExecutiveCommittee,

discussed withEURObiz the valueof the EU-Chinarelationship andits new areas ofopportunity.

ROLAND BERGERSTRATEGY CONSULTANTS

Charles-Edouard Boue



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this is exactly the chance for EU com-panies: We can support Chinas greenrevolution with innovative technology.

Eb: How can Europe make itselfmore attractive for Chinese in-

vestment?

MW: In the post-crisis global econo-my, three factors will determine thecompetitiveness of both companiesand countries: sustainability, innova-tion and most importantly, partner-ship. China is a leading partner for itsimpressive economic growth. With apopulation well over one billion peo-ple, Chinas domestic market is veryattractive. The Chinese people areeager to make economic progress and

improve quality of life. And this hasresulted in the rise of many stronglocal champions. The large volumeof the European Unions commonmarket makes it also very attractive.European and especially German in-dustry is very strong in innovation.

Eb: Where do you think Euro-peans mostly misunderstandChina?

MW:China is an enormous market,the geographic difference could bereected in peoples way of thinking.For European companies, and all in-ternational companies as well, to trulyunderstand the diversified demandsof Chinese consumers, developingproducts most suitable for their needsare key to staying competitive in thismarket.

For Siemens, China is important notonly as a market but also as a researchlocation. The country boasts one ofour largest research centers, in which

we develop products for emergingcountries, in particular.

Premier Wen indirectly indicatedwhat China expects from interna-tional co-operation when he visitedour production plant in Tianjin. Hesaid: Multinationals like Siemensthat manufacture in China, employChinese staff in China, and do busi-ness in China are considered Chinesecompanies. And those products man-ufactured in China should be consid-ered Chinese local products. We at

Siemens are proud to be recognisedas a Chinese company.

Eb: What kind of clients doesSiemens serve in China? Howdoes the business differ between

Chinese and MNC customers?

MW : Siemens has served a widerange of customers in China. Forexample, the Siemens Industry Sec-tor is one of the worlds leading sup-pliers of innovative, environmentallyfriendly products and solutions forChinese industry customers.

Sinopec Qingdao Refinery Plantis one of our Chinese clients. Thiscompany is one of the worlds largest

renery plants. It requires highly reli-able and efficient industrial produc-tion control systems to ensure highperformance.

In the near future, the Siemens In-dustry Sector will focus on servingindustrial vertical markets with largegrowth potential. Examples include:automotive, chemicals, pharma, food& beverage, minerals and pulp & pa-per.

Eb: What issue is the most chal-

lenging for the two sides to en-gage on?

MW: We have witnessed the greatefforts China has been making overthe past three decades to construct atransparent and legal business envi-ronment, driven by its intention to in-tegrate as a full member of the inter-national community. We understandthat it takes time for the country toaccomplish what it took the industri-alised countries more than a hundred

years to achieve.We share the same vision as the Chi-nese government and enterprises toconstruct a fair business environment.In a time of globalisation, enterprisesshall not be simply distinguished byits country of origin. This was evi-dent during Premier Wens visit to aSiemens production facility in Tianjinthis May when he emphasized thatenterprises that legally register inChina, employ Chinese staff, investand do R&D in China are considered

as Chinese enterprises.

Therefore, the highest priority for Si-no-EU business relations for the com-ing years must be to further intensifythe already existing good cooperation

between the two sides. A stable andlong-lasting partnership requires agood climate for discussions, foundedon the very essence of all humanrelationships, which is openness, hon-esty as well as giving and taking.

Eb: Will currency issues in Eu-rope affect this relationship?

MW: In a highly globalised worldtoday, no country can stay isolatedfrom the global community and a

crisis in a single country can be easilytranslated to another. This is why thecurrent crisis with the Euro requiresa group action by especially countrieslike Germany and China, as well asother EU countries. Most recently wenoticed that the Chinese governmenthas expressed the willingness to sup-port countries severely affected by theEuro crisis. This is indeed a responsi-ble attitude.

However, amid crisis always lies op-portunty. Chinese enterprises may

also take bold actions, such as M&Aor co-operation with their counter-parts in the affected EU countries.This actually will further build up thebusiness link between EU and China.


MW:China and Europe each have adistinct history, culture and religion.These naturally lead to differences

in understanding. However, as men-tioned previously, we have witnessedthe great development of the Sino-EU relationship. The bilateral tradehas also increased dramatically. Chinais now the EUs second-largest trad-ing partner behind the United Statesand the EUs biggest source of im-ports by far. The EU is also Chinasbiggest trading partner. Intensifiedtrade relations, flow of people andgoods, cultural exchanges will nallynarrow the gaps between differentperceptions by the two countries.



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UCB

Dr. Roch Doliveux

EURObiz (Eb): Please describeUCBs business in China.

Dr. Roch Doliveux (RD):UCB hasa long history in China, the companystarted its first pharmaceutical busi-ness operations in the early 1990s.

The company currently employs over700 people in China, and is con-tinuously expanding its commercialreach, manufacturing and R&D ac-

tivities. The companys headquartersis in Shanghai and also has an impor-tant ofce in Beijing.

Our plant in Zhuhai manufacturesseveral of UCBs drugs mainly forthe Chinese market, but also servingexport business in the region. This ac-tivity is based on a joint venture witha local Chinese company, Erkang, go-ing back to 1997.

UCB intends to upgrade and expandits manufacturing capacity and is

about to acquire new facilities, also inZhuhai, to move its technical opera-tions.

We are currently working on the clin-ical development and introduction ofseveral of its new drugs in China andAsia and plans to make these drugsavailable to Chinese patients and pre-scribers in the near future.

Consistent with the UCBs Patient

Centricity and corporate values, UCBin China invests substantial efforts inContinuous Medical Education inour areas of expertise such as epilep-sy, anemia and cardiology. We workclosely with the China AssociationAgainst Epilepsy to raise awarenessof epilepsy treatment among healthcare providers and patients.

Eb: Is the EU-China businessrelationship growing in impor-tance? Why or why not?

RD:The EU and China depend oneach other in the global economy,with Chinese and European compa-nies being parts of fully integratedglobal supply chains.

The continuously growing Chinesemarket is a top priority for Europeancompanies and for UCB in particular.European companies are wel l-positioned, due to their internationalexperience and strong presence in the

Chinese market, Europes cutting-edge technology and the high qualityof European products and services.

Both the EU and China should in-crease their efforts to further expandthe opportunities through strongerbilateral cooperation.

In my business area, the biopharma-ceuticals, Chinas regulatory environ-ment has greatly evolved over thelast decade, with greater openness to-wards global standards and practices.

Dr. Roch Doliveux isthe CEO of Belgianpharmaceuticalmanufacturer UCB.He tells EURObizabout the publicly-listed companysoperations inChina and howbiotechnologymeshes with thegoals of the 12thFive-Year Plan.



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This has resulted in some signicantchanges, some of which are inspiredlargely by the EU.

This high-level regulatory dialoguebetween the EU and China is a posi-

tive sign and shows willingness fromboth sides to work together.

Reform of the Drug AdministrationLaw is ongoing, which can provideopportunities to shape and furtherharmonise the regulatory frameworkin areas such as clinical development,product registration and related intel-lectual property rights.


RD:The main challenge in dealingwith China lies in this contrast be-tween openness and control over theeconomy.

Recently, European companies havebeen concerned that market accessrestrictions are on the rise in China.At the same time, Chinese companiesare increasingly present in the EUmarket.

Chinese companies are also increas-

ingly investing in EU companies withspecialized industrial technologies.This will stimulate more competitionat the high-end of the industrial valuechain in the future.

Despite the efforts and improve-ments made to strengthen the ruleof law in China, legal uncertaintyremains a disadvantage for Europeancompanies.

Weak enforcement notably at local

level or openly discriminatory ruleson intellectual property rights protec-tion lie at the heart of the challenges.

Since both Chinese and Europeancompanies will profit from strength-ened intellectual property rightsprotection, further efforts and com-mitments should be made on IPRenforcement.


RD:The 12th Five-Year Plan identi-es several strategic emerging indus-tries: biotechnology, clean energy,high-end equipment manufacturing,energy conservation and environ-mental protection, clean-energy

vehicles, new materials and next-generation IT.

Biotechnology is one of the prioritiesand we welcome it.

The government is reportedly pre-pared to spend more than 4 tril-lion yuan (EUR 434 billion) tosupport these industries duringthe ve-year period, with an aim toincrease those strategic sectors con-tribution from todays approximately

5% of GDP to 8% by 2015 and 15%by 2020.

We see this vision as a positive devel-opment for biopharmaceutical activi-ties in China.


RD:Growing interest in the Europe-

an market from Chinese companiesis positive. It proves that Europe is anattractive and competitive investmentdestination.

Currently relatively small in number,Chinese investments focus on theeastern and southern parts of Eu-rope.

The EU and China should negoti-ate an ambitious bilateral investmentagreement that would provide legal

certainty for both sides.Eb: How will the current issueswith the Euro affect the EU-Chinarelationship?

RD:Current issues surrounding theEurozone require a strong politicalsolution.

European companies need visibilityand predictability.

This high level of uncertainty is

detrimental to the general businesssentiment.

Eb: What do you think is thegreatest misunderstanding ofChina in Europe? Conversely,

where do you think Europeansmostly misunderstand China?

Well, I would like to move beyondmisunderstandings and focus onwhat is working, the examples I havementioned of high level dialogues areliving examples of what we can andshould be doing more.

It is only by working together andbuilding bridges that we will developpositively in both regions.

Eb: Tell us about the partnersUCB serves in China. How doesthe business differ between theChinese side and multinationalcorporations?

RD: In UCB, we prefer to speakabout the patients and with our high-ly specialized medicine, our teamsaim to bring solutions to help thosepatients and consequently their fami-lies, supported by health care profes-sionals in medical institutions.

Working with those specialists tobring our innovative therapies andalternative solutions, UCB in Chinainvests substantial efforts in Continu-ous Medical Education of health careprofessionals in our areas of expertisesuch as epilepsy, anemia and cardiol-ogy.

One example that I can mentionhere: UCB organizes an annual gath-ering event for the employees and

their families in our different loca-tions in China. During this familyday, we invite patients to participatein our activities and share our respec-tive passion and interests.

This educational approach of thehealthcare professional and the pa-tients centricity is probably the mostimportant aspect of the differentia-tion with local companies.

UCB also brought a tremendous ef-fort to place compliance at the top of

our employees priorities.



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On 11th December, 2001, the Peo-ples Republic of China became the143rd member of the World TradeOrganization, a body founded tosupervise the liberalisation of in-ternational trade, as perhaps themost important step to that point inthe countrys policy of reform and

opening up.

The last 10 years have been momen-tous for China and its partners in Eu-rope. Chinas accession to the WTOwas completed just three months af-ter the September 11 attacks, settingthe tone for the new decade and in

some ways, the new century and mil-lennium. That 10-year period beganfor China under the leadership ofPresident Jiang Zemin and PremierZhu Rongji and covered most of thetenure of President Hu Jintao andPremier Wen Jiabao.

CHINA IN THE WTO:THE FIRST 10 YEARS and the Next 12 MonthsChina will end 2011 with a celebration of its first decade as a member ofthe World Trade Organization. That event will be marked by celebration in

China for all it has accomplished and calls from the European Union todo even more, both at home and abroad. EURObizs Steven Schwankertlooks at how far the EU-China relationship has come via the WTO andwhere it will potentially go.

World Trade Organization Director-General Pascal Lamy helped negotiate China's WTO entry from the EU side.

China and the WTO EURObiz


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EURObiz China and the WTO

In this first decade of the 21st cen-tury, China began to realise much ofthe potential that had been toutedduring the 1980s and 1990s. It be-came the leading market for many ofthe worlds goods and service sectors.After spending the 1990s upgradingthe nations telecommunications in-frastructure, China is now the worldslargest user of mobile phones, xed-line telephony, Voice over InternetProtocol (VoIP) and in 2008 became

the number one market for Internetuse. At present, there are more Chi-nese online than there are citizens ofthe EU. In early 2010, it surpassedthe United States to become theworlds largest automotive market,selling over 18 million vehicles in to-tal. Earlier this year, China becamethe planets top market for personalcomputers.

Not every milestone it has achieved ispositive. In mid-2007, China becamethe worlds largest producer of green-

house gasses. It is the largest pro-ducer and consumer of chromium, aknown carcinogen and toxin, and thesecond-largest producer of electronicwaste (e-waste). It consumes more ce-ment, coal and steel than any othernation.

Throughout, China remained theworlds most populous nation, grow-ing from 1.26 billion at the start ofthe period, and ending with 1.34 bil-

lion in 2010, according to the mostrecent census.

China also took significant steps to-wards the center of the internationalstage in other areas during the dec-ade, especially its latter half. In 2008,Beijing welcomed the world by host-ing the 29th Olympic Games. ThePeoples Republic celebrated the 60thanniversary of its founding in 2009,followed in 2010 by Shanghai hostingthe World Expo.

One think-tank lauded China forits work even prior to entering theWTO. China undertook enormoustrade and FDI liberalisation duringthe 1990s before WTO accession in2001 followed by another big doseof liberalisation in line with its WTOcommitmentsChina is a textbookexample of how WTO accessionworks in tandem with national mar-ket-based reformsIn short, Chinasaccession is the WTOs biggest suc-

cess by far, said the European Centrefor International Political Economy,based in Brussels.

In mid-October of this year, PascalLamy, Director-General of the WTO,who was the European Unions chiefnegotiator for Chinas WTO acces-sion, said of its membership, Theresult is a win-win situation whereChina has received a lot from in-ternational trade and other WTOmembers have also got a lot from theopening of China. Lamy later said

Former Minister of Foreign Trade and Economic Co-operation Shi Guangsheng (right) led China's negotiations to enter the WTO.


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they believed China was either willingbut failing to implement WTO-man-dated changes, or actively looking forloopholes to avoid complying withrequirements. Only 25% believed itwas acting in the spirit of its agree-

ment.The current administration is left-leaning and nationalist in many waysand sees no real reason why it shouldmove towards more foreign access insectors like finance and automotive,for example, Ker said. But at thesame time, he cautioned against be-ing seen as protesting too much in agrowing market. In some ways, itsvery different for foreign companiesto structure their arguments on that,it looks very self-serving, when the

market is doing so well.

China has these foreign compa-nies and governments over a barrel,theres not a lot of growth in de-veloped markets, to the developingmarkets dont have the same kindof clout, so everyone wants accessto China and its a one-sided argu-ment, Ker said.

While China still remains outsidecompliance with its WTO obliga-

tions in several areas, calls for itto not only meet but exceed thoseagreed targets may be off the mark,Ker suggested, although restrictedmarkets in their own country mayblock the way for Chinese corporate

expansion overseas.

We cant expect China to open itsmarkets on a whim or because weask it to. We need to make a case thatChina can accept and thats in its in-

terest, Ker said.There are only two things that willchange that picture, and there isroom to be more optimistic than thecurrent situation gives. Chinese com-panies will eventually start to look toexpand to developed countries and ifthey want to do that, they will have tohave some kind of reciprocal agree-ment, it will be difcult for Europeanlegislators to tell their own companiesthat they are allowing Chinese partic-ipation in a way they are not getting

in China, he said.

A Mutually-DependentFuture

While the current economic crisis inEurope has put China in the driversseat, the situation in the medium tolonger term will likely be more bal-anced, with participation from theEU, China and also the United Statesand developing countries includingIndia. However, the EU is already

Chinas largest partner for exportsand imports.

One area presently facing the rela-tionship is the Euro and the value ofChinas currency. While a larger issue

for the United States, especially in anupcoming presidential election year,Ker sees this as a sunset issue onewhose time has past for all parties.

The currency issue that attracted a

lot of attention in the past, but the ar-gument is already outdated. The sec-ond thing is that the currency is onlyone way of saying the price of goodsin China and its only one factor thatfeeds in. The other factor is domesticcosts in China and those are risingvery quickly. Land inflation, risingwages, utilities are rising, the cost ofproducing in China relative to otherparts of the world is adjusting in oth-er routes outside of the currency. Itsa distraction from other distortions inthe Chinese economy, such as interest

rates, Ker said.

One question that remains is: in 10years, wil l the 20th anniversary ofChinas accession to the WTO be asimportant as its 10th?

I dont think in 10 years time wellbe talking about Chinas member-ship in WTO in the same terms. Thereason why were looking back is two-fold. The first reason is because itwas clearly a very landmark moment

for China, the economic situationchanged here quite dramatically as aresult. In many ways, there is a schoolthat would like to highlight the an-niversary to show how little is beingdone and use it as a way to initiate a

EURObiz China and the WTO


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China and the WTO EURObiz

EMBA in China

US Degree, US Professors

Scholarships Available toend of 2011

Next Intake March 2012

Upcoming Information Sessions:

November 8 & 30

December 15

Contact us:

13439920374

[email protected]

http://www.rhsmith.umd.edu/china/

University of International Business and Economics

Offered in partnership with:

new reform push, said the EIUs Ker.

The other reason is that everyone wants access to Chinanow and so it is a way to help gain access to that market.Ten years from now we can be condent there will havebeen a great deal more reform, he added.

The Present Crisis

In the short-term, China can become a more strategicinvestment partner for Europe but not a saviour. Evenif the Euro share [of Chinas foreign exchange reserves]were to rise to 30-35% [of its total] this would only meanUSD 195-228 billion (EUR 150-175 billion) in financ-ing available from China or 20-24% of [Greece, Italy,Ireland, Portugal and Spains] total refinancing require-ments, Deutsche Bank said in a September research note.

China has also already been active in buying Europeandebt this year, even before the deepening of the crisis andincreased calls for China to participate more financially.For example, China has been a big buyer of AAA-ratedbonds issued by the European Financial Stability Facil-ity (EFSF), the bailout vehicle which is guaranteed bythe member governments. It has been a less big buyerof European Financial Stability Mechanism (EFSM) is-sues, which are backed by the EU Commission and whichare also AAA-rated, said Standard Chartered Headof Greater China Research Stephen Green, in a recentresearch note China Less America, more Europe,highlighting the countrys actions to balance its foreign ex-change reserves away from the U.S. dollar.

The move would also potentially be unpopular for theChinese government at home. Chinese public opinion to-wards increased investment is unlikely to be supportive asthe general perception is that the troubled Eurozone mem-ber countries have lived beyond their means and are nowturning to the savings of a country that is still confrontedwith domestic development needs of its own, DeutscheBank wrote.

Moving Forward

These financial issues will certainly not be resolved fullyby the end of 2011, and therefore will remain prominentin the relationship in 2012 and likely beyond, as both sideswork to increase growth and stability.

Since joining the WTO has made great progress from adeveloping country with great potential, to realising muchof the opportunity available to it and preparing for newstages of growth in areas such as urbanisation, servicesand the development of its small and medium-sized en-terprises. Despite its current financial woes, the EU stillhas an important role to play in this development, offeringexperience and technology in market sectors where Chinastill lags. As such, Chinas desire to be a more integratedmember of the worlds trade and financial systems canbe fullled through greater opening of its markets and its

own participation in those systems overseas.


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A DECADE IN THE WTO Chinas Achievements and Benets after 2001

On December 11th, 2001, China became the 143rd member of WTO (World Trade Organization). As a devel-oping country, China made commitments in decreasing tariffs, reducing and eliminating non-tariff barriers,eliminating trade limitations on agricultural products and opening the services market gradually, such asbanking, insurance, tourism and telecommunications.

Over the last decade, China has made considerable efforts to fulfill its WTO obligations and commitments.The average tariff has decreased from 15.3% to the current 9.8%. More than 100 trade departments of servic-es have been opened to foreign companies. Also, China has modified or revoked about 3,000 central laws andregulations, as well as over 190,000 local regulations to establish a trading system in line with WTO rules.

Since the entry into WTO, Chinas economy has experi-enced rapid growth in the past decade. During the periodfrom 2001 to 2010, Chinas GDP increased at an averagerate of over 10%, amounting to 4.43 trillion. Per capitaGDP in China also grew from about 1,077 in 2001 to3,314 in 2010.

Investments have always contributed a lot to Chinas econ-

omy growth. The GDP growth contributed by investmentsincreased to about 49.5% in the period from 2001 to2007, up from 36% during the period from 1990 to 2000.In 2009, Chinas government issued a stimulus packageof 420 billion to stimulate economy growth facing theglobal financial crisis. In 2010, investments contributed54.8% to Chinas GDP growth. During 2001 to 2010,xed investment in China grew at an annualized rate of

23.5%, reaching 3.10 trillion in 2010.

With the rapid development of Chinas economy, incomelevels of Chinese residents also improved. In 2001, the percapita disposable incomes of urban and rural residents inChina were about 857 and 296, respectively. By the endof 2010, these gures have increased to 2,129 and 659,at an annualized rate of 10.6% and 9.3%. Increasing in-

come levels have stimulated consumption. Retail sales ofsocial consumer goods totaled 1.72 trillion in 2010, at anaverage rate of 13.8% per annum since 2001.

In addition, international trade is also increasingly becom-ing a key driver of Chinas economy growth. Total tradeof China increased from 0.53 trillion in 2001 to 2.24trillion in 2010, at an annualized rate of 17.5%.

By Rachel Wang, Industry Research Department, All China Marketing Research

EURObiz Industry Focus

GDP Growth, Fixed Investment, Retail Sales of Social Consumer Goods and Total Trade in China, 2001-2010

RAPIDGROWTHOFCHINASECONOMY

Source: National Bureau of

Statistics, China Customs,ACMR

All China Marketing Re-search Co. Ltd. (ACMR)is a leading provider ofbusiness information andmarket research, focus-ing on collecting, study-ing and analyzing dataand information on themacro economy, indus-trial sectors, enterprisesand business markets in

China. www.acmr.com.cn


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While opening to the world, China benets from the in-creasing international trade as well. By 2010, as the big-

gest exporter in the world, Chinas exports amounted to1.19 trillion, which was more than quadrupled comparedwith 2001. Meanwhile, the country is also the second big-gest importer in the world, with imports amounting to1.05 trillion in 2010, increasing at an annualized rate of17.2% since 2001.

Asian countries (except China itself) still contribute themost to Chinas total trade, which was 52.7% in 2010,

although down from 56.5% in 2001. Since Chinas entryinto WTO, the country has increased trade with morecountries, especially with Latin American and Africancountries, which accounted for 6.2% and 4.3% of Chinastotal trade in 2010, up from 2.9% and 2.1% respectivelyin 2001.

Europe has always been an important trading partner toChina. In 2010, China exported 267.87 billion goodsto Europe, accounting for 22.5% of Chinas total exportvalue in the year and increasing at an annualized rate of20.3% since 2001. Also, Chinas imports from Europe in2010 totaled 164.32 billion, making up 15.6% of totalimport value and increasing at an average rate of 14.1%per annum.

Also, more foreign companies entered or invested in theChinese market during the past decade. In 2001, therewere 203,208 foreign companies operating in China. In2009, this number was 434,248, more than doubled than2001. During the period from 2001 to 2010, foreign directinvestment in China has increased from 48.47 billion to

79.74 billion, at an average rate of 5.7% per annum.

Meanwhile, more Chinese companies started to invest inforeign countries during the period. In 2010, about 13,000Chinese companies have established 160,000 companies in178 foreign countries. Direct investments of Chinas com-panies in foreign countries increased from 7.13 billionin 2001 to 51.89 billion, at an annualized growth rate of24.7%.

Geographic Spread by Total Trade of China, 2001and 2010

Foreign Direct Investment and Chinas Invest-ment in Foreign Countries, 2001-2010

Sino-Europe Trade

TRADINGWITHTHEWORLD

Source: National Bureau of Statistics, China Customs, ACMR

Source: China Customs, National Bureau of Statistics, ACMR

Note: 2001 data in this article were all calculated in 2002 exchange

rate of Chinas Yuan to Euro, which was not available in 2001

Industry Focus EURObiz

International Trade in China, 2001-2010

Source: China Customs, ACMR


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Building on the successful HR Confer-ences of 2005-2010, the EuropeanUnion Chamber of Commerce inChinas Shanghai Chapter is delightedto be holding its annual 7th HR Con-ference on 25th November, 2011 atThe Longemont, Shanghai. This full-day conference provides attendees withan unparalleled opportunity to obtaininsights on the main HR challenges forcompanies doing business in China forthis year and beyond.

The European Chamber HR Confer-ence has evolved into one of the pre-mier gatherings of industry decision-makers and HR professionals. This hasgiven the HR Conference an unrivalledscope of both high-level insight andpractical application.

Carrying the title Beating Limita-tions, this years conference will carryan enhanced format drawing inputfrom leading Chinese CEOs and HR

Directors alongside the premier Euro-pean expertise for which the conferencehas become renowned.

During the conference attendees willhave the opportunity to learn moreabout the many services offered by oursponsors. This event has a reputationfor receiving a large turn out of HRdirectors, HR managers and industryprofessionals at the full day event.

Tickets are now on sale for just 1000RMB (Member Price) and 1500 RMB(Non-Member Price).

For ticketing sales, sponsorship op-portunities or more information pleasecontact Scott Goodfellow at [email protected] / 021

6385 2023 +103.

7th European Chamber

HR Conference 2011/2012 Beating Limitations

EURObiz Special Event


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November

Tue. 8thThe Power of Leading from Within

TrainingShanghai

Wed. 9thInterchamber Networking DrinkGuangzhou

Thu. 10thManaging the China Challenge: Howto Achieve Corporate Success in thePeoples RepublicBeijing

EU-Sino Low Carbon and EnergyEfciency ForumGuangzhou

ISO 50001 TrainingShanghai

Tue. 15thCompliance ConferenceShanghai

Thu. 17thGM Briefing: Tianjin Urban Plan-ning & Development of Tianjin Bin-hai New Area by Mr. Zong Guoying,

Chief Director of Tianjin BinhaiNew AreaTianjin

Thu. 24thLow Carbon Business Approach: De-velopments in Low Carbon ProductInitiatives and CerticationBeijing

Shenzhen - EU Film Festival Open-ingShenzhen

Fri. 25thHR ConferenceShanghai

End of Nov.Visit of Tianjin Xiqing IndustrialZoneTianjin

December

Fri. 2ndYear End Cocktail - 2011 Photo Con-test Award NightTianjin

Sat. 3rdShenzhen - Christmas Smurf PartyShenzhen

Early Dec.F&T Workshop: Tax Executive Sum-mary 2011, IIT, CIT, TP and Cus-tomsTianjin

Early Dec.HR Workshop: risk management andsolutions in regards to labor relations,

VS update on current status of socialinsurance lawTianjin

January

Sat. 14thGuangzhou - Gala DinnerGuangzhou

EURObiz Events Event information is subject to change. For full details,please visit our website:www.europeanchamber.com.cn/view/events

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EURObiz Marketing

There is a temptation among manydoing business in China to see thenations challenges through the tintedglass of ones own industries or spe-cialties. As a marketer, for example,a rst instinct may be to attribute thetroubles or failures of a local compa-ny to an issue with their marketing. Itis an easy conclusion to reach: if Chi-nese companies are held to the samestandards of marketing performance

to which foreign rms are, few wouldmeasure up. One observer suggestedthat in Chin

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