Published:
China has recently come under pressure from Europe for its domestic bias to companies competing for public construction contracts. While China has had to loosen the wording of laws after coming under fire before, many companies are up in arms after trying to endure some of the trials entailed in entering the Chinese economy.
Recently, the Chinese government instated an almost $600 billion stimulus package. Many European companies that would normally be great bidders for a piece of this stimulus are being left out. China requires that only companies with their trademark and technology registered in China can have access to public works contracts. While this may not seem like a big deal, many of these companies, especially the smaller foreign based companies, rely on their technological innovations to keep their competitive advantage. The inspections that come along with registration are also considered by many foreign countries as a way to give away their technological inventions (from video). This is in addition to regulations, testing, and local certifications. On the contrary many larger companies, such as Siemens AG, who already have large presences in China can move around quite easily.
While it does seem extremely unfair to discriminate against foreign companies to such a degree, it is not unheard of. Just a century ago, the majority of countries had high tariffs on imports to protect their internal industries. Since the rise of free trade agreements and other related tools, this has become a rarity in this degree. Although, the U.S. recently had a “Buy American” campaign which had a very similar effect on foreign industries. China originally instated the laws in order to move away from their dependence on cheap manufacturing for the majority of their economy. Also, China is still an emerging market, which by definition means that it has not developed to the point of many other countries. This does beg another question which can be interpreted as the real problem. At what point does the size and nature of an economy bring it to the point where impediments to imports can deem sanctions and other actions necessary for the well-being and fairness of the rest of the world?
File under
Share this article
