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BEIJING (Reuters) – China should abandon a high-level strategy promoted by President Xi Jinping to increase its autonomy, or risk damaging prospects for innovation and growth, a European business group said on Thursday.
“There are disturbing signs that China is increasingly turning in on itself (…) and this trend casts considerable doubts on the country’s future growth trajectory,” the Chamber’s report said. European trade.
A desire for political control and a “fear of volatility” are to blame, House Speaker Joerg Wuttke told a briefing.
China has attempted to reduce its dependence on overseas markets and technology in its long-term development, a change brought about by an increasingly deep break with the United States, in a so-called “dual circulation” strategy.
Continued political support for state-owned enterprises, the “destabilizing” influence of national security concerns on economic policy and efforts to increase control over the private sector will weigh on innovation and efficiency, report says .
“While the costs of such an approach may not be felt for several years, they are substantial and should not be overlooked.”
Dual circulation will force China to “deviate from the spirit” of the 1970s reforms that opened up the country’s economy and spurred decades of rapid growth, he said, resulting in less foreign investment. , a misallocation of resources and a growing decline abroad.
“China runs the risk of hitting below its weight,” Wuttke said.
‘EXIT FROM THE MARKET’
Chinese policymakers stressed that the country will continue to open up and welcome foreign companies.
While some foreign companies, such as those in the chemical sector, which have the technology China needs, are being encouraged, others are not, according to the House report.
Some foreign suppliers of network equipment and services told the House that “exit from the market is inevitable” due to increased surveillance for reasons of national security. Health equipment suppliers, for example, are sometimes unable to sell because hospitals are trying to “buy Chinese,” Wuttke said.
The report also urged China to defuse tit-for-tat sanctions against Europeans that hamper ratification of a key investment deal with the European Union.
The bloc had imposed sanctions on Chinese officials for alleged human rights violations in the western Xinjiang region, to which Beijing responded with its own sanctions against Europeans, including European lawmakers.
The bloc’s executive arm, the European Commission, unveiled plans in May to reduce reliance on Chinese and foreign suppliers in six strategic areas.
Foreign companies contribute a significant portion of China’s tax revenue, trade and employment, Wuttke said, and in turn China remains a key market for European companies that have helped support operations during the COVID-19 pandemic.
“In many cases … the operations in China are the ones that stabilize the head office and essentially bring business to the group,” he said.
(Reporting by Gabriel Crossley; Editing by Alex Richardson)
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