Green Business and Protectionism in China

Posted by: Dexter Roberts on June 12, 2009

I hardly expected to get an earful on how China’s $586 billion stimulus package fails to meet even basic standards of transparency and well may prove of limited benefit to global companies—not at a forum devoted to promoting green technology and environmentally-friendly business. But for the almost 600 participants at the Global Green Business Summit, jointly held by BusinessWeek and the Tianjin government on June 8 (only posting this blog now as I’ve been busy with a separate story on the rise of China’s southwest) that proved part of the program. During a panel called “The Government Landscape” moderated by my colleague Charlotte Li, a question was raised about China’s huge stimulus package—what kind of opportunities does the stimulus provide for companies, including foreign ones that sell green technology products?

The answer came courtesy of the very knowledgeable Bruce Quinn, vice president for strategic development at Rockwell Automation (Rockwell sells industrial automation equipment to mining, power, and other infrastructure projects in China. Rockwell’s equipment can significantly raise efficiency in China’s factories and so lessen reliance on polluting energy sources like coal). Quinn previously spent 19 years working for the U.S. government in various roles in commerce, trade, and also national security, in postings in Latin America, the Middle East and Asia. I first met him about a decade ago when he was based in Beijing working for the commerce department.

According to Quinn, this is a very difficult question to answer. Why’s that? Mainly, it is because of the stunning lack of transparency surrounding China’s much-heralded fiscal stimulus package. That uncertainty extends to even the question of just how big the stimulus actually is. Quinn pointed out—as others have before—that many of the “new” projects that local governments have been touting, are repackaged projects that in some cases were announced years ago. And when Rockwell has requested more detail on what new projects are included in the stimulus (real ones, not repackaged ones), Chinese officials, both in Beijing-based ministries like the NDRC and Ministry of Commerce, as well as officials in the provinces, have been unable to provide even basic information. Equally daunting, has been trying to uncover just how extensive are procurement rules that favor locally-produced products over foreign ones.

And despite a near constant barrage this year of complaints emanating from Beijing about protectionism and ‘buy-local’ rules in other countries (a highlight was an editorial penned by China’s trade minister Chen Deming against protectionism, that ran in the Wall Street Journal earlier this year) Chinese officials have informally and sometimes formally made it very clear that Chinese products are to be favored when it comes to the stimulus package. Although Quinn did say that they have been able to grow their business in China in recent months, the lack of clarity surrounding the stimulus package and related procurement policies, have made it exceedingly difficult for companies like his own to sell more.

The American Chamber of Commerce in its annual White Paper on doing business in China released April 27, points to the lack of transparency around all government procurement, as well as rules that favor local companies, as being issues of major concern for foreign companies operating in China. Indeed, green technologies, amongst a host of others, are those where China has rules favoring locals, the report says. “Certain procurement policies explicitly favor domestic providers of energy-efficient or green technologies,” the report states, warning that “this untenable distinction between “domestic” and “foreign” in government procurement practices negatively impacts the sustained growth and development of the domestic economy” in China. And of course, this negatively impacts the growth of foreign companies on the mainland too.

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Reader Comments

Steven

June 12, 2009 07:31 PM

For the gov money, of course it will be mostly spent on domestic products. Every gov is doing the same thing, such as Buy American Act

Andy

June 12, 2009 11:46 PM

Transparency? That is rich coming from a business media that is based in the country that caused the global economy crisis today due to years of lying and cover ups.

pathetic loser

June 13, 2009 11:46 AM

it's not favoring local companies, it's guanxi and foreign companies are not good at it. and not to mention that most white foreigners in asia have this "superiority complex" so they are rude to the locals so if i'm a government official why would i buy foreign where some uneducated white guy with a superiority complex is trying to do business with me or some local chinese who is wining and dining me. who do i give the business to.

so dexter roberts, if you're such the chinese expert, you sure do suck at your job. i guess you're the typical white loser in asia who are there "to teach" the naive native how to "do" things like the rest of those uneducated whites in asia.

here's a tip: go home

sevendayz

June 14, 2009 05:47 AM

Pathetic Loser, you sure sound like one.

There is one main reason Chinese government favor their local business: They can mass produce fake products. Chinese don't care about copy rights. Just look at their auto industry, nothing innovating about them. But their government don't care as long as they can keep producing cheap stuff that their pathetic citizens are willing to buy.

I'm living in Korea and it's amazing how Chinese flood foreign markets with their fake consumer goods (p.s. they're sure dumber than the white guy because nothing made Chinese works properly). While its true that many Asian nations blame Americans as the architects of unsustainable financial conventions, they are even more pissed about selfish, immoral business tactics of the Chinese. I don't even understand why these people are so cocksure, I mean they were beaten by little islanders.. twice!

BeijingMan

June 14, 2009 08:56 PM

"Pathetic Loser" has a point, Guanxi is the key factor. Foreigners are not considered for serious Guanxi. In China your product is just 50%, your Guanxi is the other 50%.

As Chinese say about foreigners: even if you tell them, they still don't understand.
More: http://beijingman.blogspot.com

Matt

June 16, 2009 01:02 AM

Transparency and protectionsim are two intensely subjective terms. If you dont read chinese, dont integrate with the local information infrastructure (not all of it is 'hardware'), and dont do business daily here then you may not understand or appreciate what information is actually available. This repackaging of older programs and ideas is also nothing new or unique to China. What is new and unique is that China (1) isn't draining the world financial systems by erasing billions of dollars of market value from assets and (2) is releasing the capital into domestic markets for use in purchasing locally and internationally to stimulate local and global consumption.

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BusinessWeek’s team of Asia reporters brings you the latest insights on business, politics, technology and culture from some of the world’s biggest and fastest-growing economies. Eye on Asia’s bloggers include Asia regional editor Bruce Einhorn, Tokyo reporter Ian Rowley, Korea bureau chief Moon Ihlwan, Asia News Editor and China Bureau Chief. Dexter Roberts, and Hong Kong-based Asia correspondent Frederik Balfour.

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