Xi's Import Fair Offers Deals But Leaves Many Barriers Intact
(Bloomberg) -- The multi-billion dollar deals done at the China International Import Expo in Shanghai this week show both how the nation is opening up, and what barriers still remain.
The harvest from the first China International Import Expo will bolster President Xi Jinping’s pledge to continue relaxing access to the world’s largest pool of consumers. That’s underscored by the 350 or so deals signed by firms among the 3,600 exhibitors -- including Siemens AG, ABB Ltd and Saudi Aramco.
At the same time, interviews with dozens of executives trying to break into or expand in China -- like a Canadian maker of air purifiers or a German manufacturer of auto electronics -- detail the huge variety of industry-specific barriers that have to be negotiated to gain that prize, and some industries are still closed entirely.
While that’s an old bugbear, it’s the threat of what former Treasury Secretary Hank Paulson this week called a new Cold War with the U.S. that makes Xi’s follow-through on his new pledge all the more closely-watched.
“What we want are concrete actions and a concrete timetable of reform,” Carlo Diego D’Andrea, the Shanghai chairman for the European Union Chamber of Commerce, said following Xi’s opening speech this week.
Over 350 deals were announced from Nov. 5 to Nov. 8 in Shanghai, according to a tally by Bloomberg News, with the vast majority of those coming in the energy sector. The biggest batch was Sinopec’s $45.6 billion signing of import contracts with nearly 50 companies for oil and chemical products, among others.
Government enterprises in energy, shipbuilding, steel-making, automobiles and other sectors dominated the purchasing, as Beijing utilized its political muscle in service of Xi’s initiative. The role of the state is at the core of the discontent with China’s economic policy that has led to the current standoff with the U.S.
The role of state-owned enterprises is familiar to Quebec-based Industrie Orkan Inc, a firm that made its first connection with China at the height of the SARS outbreak in 2003, when its systems that allowed hospitals to quickly cleans the air in rooms were used.
The firm wants to sell systems directly to Chinese hospitals now, explains Liu Hao, a Shanghai-based representative. The technology that Orkan commands, according to Liu, can re-purpose a common hospital room into a germ-free room ready for procedures like craniotomy within two days.
The process of getting a license to sell directly involves creating its own local rivalry: According to Liu, Orkan first must sell some of its non-core technology and products to a Chinese state firm, then let the firm brand the products themselves. In return the state firm applies for two licenses, one for itself, one for Orkan.
“It’s an untapped market with tremendous potential and we don’t mind sharing it with another company if it gets us there,” Liu said.
Sharing is a key part of an agreement signed Tuesday by Florida-based Carnival Corp. -- the world’s largest cruise ship operator-- Italy’s Fincantieri SpA, and China State Shipbuilding Corp. for the purchase or construction of four cruise ships.
In order to help the Chinese shipyard gain the expertise needed to build cruise ships -- a goal outlined in the Made in China 2025 blueprint -- Carnival’s long-time Italian partner will license its technology to the local state firm, thereby aiding Carnival’s quest to break into the Chinese tourism market.
In other words, some companies are glad to do the business, and will jump through whatever hoops are necessary while waiting for delivery of reform.
"I have no reason to doubt it," says Ronald Schaare, head of marketing for Preh GmbH, a 99-year-old German automotive electronics manufacturer now owned by a Chinese parent, of Xi’s pledge on market access. At the same time, bureaucracy means doing business is cumbersome, he says.
"If you forget one number or one little detail, your stuff will be stuck in customs," he says.
In Schaare’s industry, doing business in China has changed fundamentally. This year, the government removed ownership limits on joint-ventures in car manufacturing, handing companies like Daimler AG, Volkswagen AG and General Motors Co. a chance to obtain a bigger control over their businesses in the world’s largest auto market.
Xi further pledged this week to ease restrictions on foreign ownership in healthcare and education, without detailing further.
"For so many years China was like an island,” Schaare says, “but now it’s really opening up."
To contact Bloomberg News staff for this story: Jing Yang de Morel in Shanghai at firstname.lastname@example.org;Matthew Boesler in Shanghai at email@example.com
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With assistance from Editorial Board