MNI Intvw: Doing Business in China Riskier As Trade War Looms

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

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