MNI Intw: Doing Business in China Riskier on Trade War(REPEAT)

By Iris Ouyang

     BEIJING (MNI) - Foreign businesses in China may incur substantial losses as

China prepares to take forceful measures responding to punitive 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, causing

custom holdups, 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. The yuan

is already weakening on the prospect that the deepening dispute may hurt its

exports and economy.

     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 markets around the world slumped with the Shanghai

Composite Index dropping below 3,000 for the first time since September 2016.

     Many European companies worry using tariffs as a trade tactic disrupts

global supply chain, Harborn said at a press conference to release the chamber's

Business Confidence Survey on doing business in China. 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, rather than

really hoping to reduce the trade imbalance, Harborn said. 

     "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 obstacles and ending unequal treatment for foreign

companies, 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. 

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

[TOPICS: M$A$$$,M$Q$$$,MC$$$$,MI$$$$,MT$$$$,MX$$$$,MGQ$$$,MN$FX$]