BEIJING (AFP) – European businesses in China on Tuesday warned the Communist Party urgently to implement promised reforms or risk seeing growth in the world’s second-largest economy plummet and incomes stagnate.
“The ‘golden age’ for business in China is drawing to a close,” the European Union Chamber of Commerce in China said.
“China is nearing the end of its window of opportunity to create the framework to rebalance the economy,” it added in its annual European Business in China Position Paper.
“Unless China’s current leadership maintains the requisite sense of urgency and is resolute in their pursuit of reform, there is the very real risk that China’s economic sunrise could dawn into a middle-income trap.”
The Communist Party announced a blueprint for far-reaching reform at the end of a key meeting in November known as the Third Plenum.
It called for allowing market forces to play a “decisive role” in resource allocation, a bigger function for private capital and further financial and currency reforms.
But it also said the dominant role of state-owned enterprises (SOEs) was the “foundation of the socialist market economy”, raising questions about competitive fairness.
The Third Plenum document was generally well-received, although economists and business executives have warned that its implementation would need to be closely watched.
The 1,800-member EU Chamber expressed doubts over how committed authorities are to the “decisive role” pledge, questioned whether foreign industry can ever achieve equal treatment with Chinese counterparts and raised concerns over the position of SOEs.
“The problem we have is that the implementation is not clear yet,” Joerg Wuttke, president of the EU Chamber, told AFP ahead of the paper’s release.
“We have seen very few steps in the financial sector where the reforms actually have taken place, hence, the members clearly see a sense of urgency.”
The pledges were laudable, he said, but “China just has to move faster on implementing the laws and the market reforms that they have outlined”.
Among steps mentioned in the report are further interest rate liberalisation, allowing more foreign banks to operate, and stricter enforcement of often-ignored environmental standards.
Wuttke, an executive with German chemical company BASF, said nothing less than the successful transformation of China’s economy was at stake.
China’s leaders say they want to make private demand the key driver of the economy, moving away from over-reliance on huge and often wasteful state-backed investment projects that have formed the basis for decades of expansion.
Such a transformation is expected to result in slower but more stable and sustainable growth in the long run. China in March set its annual growth target for this year at about 7.5 per cent, the same as last year.