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.