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By Iris Ouyang
     BEIJING (MNI) - Foreign businesses in China may incur substantial losses as
 China begins to flex its muscles responding to punishing trade tariffs from the
U.S., a Beijing-based European commerce representative told MNI on Wednesday.
     "If China has to deploy different tools and muscles it has, it will
certainly have a negative impact on the business environment" both in China and
globally, Mats Harborn, president of the European Union Chamber of Commerce in
China, said in an interview. 
     For start, China can apply pressure on or even punish U.S. companies in
China, such as by increasing regulatory, health and safety inspections and
causing custom snags, or delaying the issuances of licenses, Harborn said. 
     China may also resort to devaluing its currency to save exports, said
Harborn, adding it would be a hard decision for the government to make. 
     All economies and companies may be vulnerable in a trade war as they are
tied up in a complex global supply chain, Harborn said. 
     --MUSCLES OF CHINA
     "I don't think the U.S. should underestimate the muscles of China, this
also would be very dangerous," he said. 
     Harborn spoke in a week fraught with intense tit-for-tat measures by the
two largest economies. Stock around the world slumped and the CNYUSD dropped.
     Many European companies are worried because using tariffs as a trade tactic
disrupts global supply chain, Harborn said at a press conference to release the
chamber's Business Confidence Survey result. These tariffs also undermine
European companies' business plans and cloud the outlook of the global economy,
he said.
     In some ways, the Donald Trump administration may be exerting pressure on
China hoping that would change its trade and business behaviors, Harborn said,
expressing his sympathy. 
     "The root of the cause of the problem lies in China," Harborn said. China
hasn't done enough to reform and open up for foreign companies to show that it's
serious about removing business obstacles and ending unequal treatment for
foreign businesses, he said. 
     --INSUFFICIENT OPENING
     China's opening measures in financial services are insufficient, and
broader problems with its business environment, such as regulatory barriers, are
still among major worries of European companies, Harborn said. 
     "We share the concerns with the U.S. government, even though we don't agree
with the methods," Harborn said. 
     The U.S. should seek multilateral means, such as the World Trade
Organization, to address its grievances rather than resorting to tariffs, he
said. 
     "It 
--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com
--MNI Beijing Bureau; +86 (10) 8532-5998; email: iris.ouyang@marketnews.com
[TOPICS: M$A$$$,M$Q$$$,MC$$$$,MI$$$$,MT$$$$,MX$$$$,MGQ$$$,MN$FX$]

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