APEC? American and European Union chambers of commerce in China, said they felt increasingly unwelcome

In surveys released earlier this year by American and European Union chambers of commerce in China, member corporations said they felt increasingly unwelcome, believed they are unfairly targeted by recent antimonopoly and anticorruption campaigns and have struggled with mounting labor costs, rising political risk and opaque rules.

The EU Chamber said that its members lost out on 21.3 billion euros in revenue last year due to market access limitations and regulatory barriers.

Economic nationalism is a body of policies that emphasize domestic control of the economy, labor, and capital formation, even if this requires the imposition of tariffs and other restrictions on the movement of labor, goods and capital.

The following is from the Wall Street Journal

CEOs at APEC Strike Upbeat Note Despite Rocky Year (Source)

As China hosts its biggest international economic summit in years, the chiefs of multinational corporations attending the Asia-Pacific Economic Cooperation forum are putting on their game face and using the occasion to publicly underscore their faith in the world’s second largest economy.

Executives spoke on the sidelines of the Asia-Pacific Economic Cooperation forum on Sunday and Monday, lauding developments like its e-commerce boom and progress in nurturing a growing consumer culture. Many multinationals still rely on China as a key market for growth, which remains a steadfast source of growth in markets ranging from cars to pharmaceuticals.

But many foreign businesses have endured a difficult year in China. A growing list of companies have faced regulatory scrutiny. Many are still grappling with the effects of China in the throes of an economic transition, as it tries to balance breakneck growth with growing worries about the environment and other social issues.

China will continue to be a key driver of Wal-Mart Stores Inc.’sWMT +0.08% international sales in the next few years, said Wal-Mart’s head of Asia and international strategy, Scott Price. Other corporate chiefs interviewed by The Wall Street Journal, including Eli Lilly & Co. Chief Executive John C. Lechleiter and Rio Tinto PLC Chief Executive Sam Walsh, say China will continue to grow and its slowdown should be taken in stride.

“What China calls a slowdown, the rest of the world would love to be able to experience,” Mr. Lechleiter said.

Despite China’s efforts to shift its economic focus toward consumerism and away from big-ticket construction projects, Mr. Walsh maintained that it was an opportunity to reorient the company toward providing commodities to make cars, refrigerators and other consumer products.

For Rio, the days of acrimonious squabbles with China over iron ore pricing have largely faded in the past four years, since the development of  spot pricing system for the steelmaking material, of which China is the world’s largest importer. But other companies are still wading through a thicket of Chinese regulation, and say the corporate climate is getting increasingly difficult.

U.S. President Barack Obama, speaking at APEC on his trip to Beijing Monday, urged China to level its playing field for its businesses, develop policies protecting intellectual property, and reject commercially-driven cyber-security breaches.  “Foreign companies must be treated fairly so they can compete fairly with Chinese companies,” Mr. Obama said.

In surveys released earlier this year by American and European Union chambers of commerce in China, member corporations said they felt increasingly unwelcome, believed they are unfairly targeted by recent antimonopoly and anticorruption campaigns and have struggled with mounting labor costs, rising political risk and opaque rules.

The EU Chamber said that its members lost out on 21.3 billion euros in revenue last year due to market access limitations and regulatory barriers.

Businesses are moderating their optimism about the future in China, said John Lenhart, Director and Chief Representative of trade group US-China Business Council’s Beijing office. “The reason that is policy uncertainty,” said Mr. Lenhart.

Chinese authorities have over the past three years fined Wal-Mart $9.8 million, sanctioning the retailer for using misleading pricing, selling poor-quality products and even peddling donkey meat that turned out to be fox. The Bentonville, Ark. retailer is also feeling the pinch of China’s austerity campaign, as sales of gift cards and mooncakes drop.

Lilly executives said the China has yet to fully address some underlying problems that pose compliance risks for the healthcare industry–such as low doctor wages and an unconsolidated market of wholesalers.

Despite the uncertainties, China for many corporations is not a matter of choice. It remains a big bet for their future growth.

Wal-Mart’s Mr. Price said he is optimistic about the future of reform in China. Qualcomm, which has been under scrutiny in China for allegedly breaking antimonopoly law to sell its high-tech chips, announced Monday plans to open a mobile-health innovation center in the country.

Rio’s Mr. Walsh also remains bullish even as a Chinese slowdown has helped take iron ore prices down about 40% from the start of the year, to their lowest level in five years. Mr. Walsh contends that even China’s efforts to combat pollution, long thought to be a long-term bearish drag on iron ore, will play well for the kind of clean-burning ore that Rio has an edge in producing, he said. “They need high-quality iron ore to combat pollution, to reduce the amount of energy that’s used, the amount of slag that’s produced.”

China will likely help the coal-market rebound next year, said Greg Boyce, chief executive of Peabody Energy Corp. , the largest U.S. coal producer by output. Mr. Boyce, in an interview on the sidelines of the Asia-Pacific Economic Cooperation forum in Beijing, said a U.S.-led boom in shale-gas production didn’t pose a challenge to coal’s position as the world’s dominant source of energy by far, and said Chinese coal demand would continue to rise despite pledges by Beijing to reduce reliance on coal usage to cut pollution.

At APEC, it fell to Chinese companies to express concern about the direction of economic policy in their own country. Dalian Wanda Group Chairman Wang Jianlin said that in China’s attempt to overhaul its own companies and create a market-driven economy, there should be a greater push for profitability.

The chairman of Fosun Group, a Chinese investment company akin to Warren Buffet’s Berkshire Hathaway, said that the government relies too heavily on real estate to propel the economy.  “If we can’t solve this vicious cycle, then our risk is too high,” said Fosun Chairman Guo Guangchang, speaking at summit talk on the future of business in China.

– Laurie Burkitt, Chuin-Wei Yap and Brian Spegele

Economic nationalism is a body of policies that emphasize domestic control of the economy, labor, and capital formation, even if this requires the imposition of tariffs and other restrictions on the movement of labor, goods and capital. In many cases, economic nationalists oppose globalization or at least question the benefits of unrestricted free trade. Economic nationalism may include such doctrines as protectionism and import substitution.

Examples of this include Henry Clay’s American System, French DirigismeJapan‘s use of MITI to “pick winners and losers”, Malaysia‘s imposition of currency controls in the wake of the 1997 currency crisisChina‘s controlled exchange of the yuanArgentina‘s economic policy of tariffs and devaluation in the wake of the 2001 financial crisis and theUnited States‘ use of tariffs to protect domestic steel production.

Instances became more visible from 2005 after several governments intervened to prevent takeovers of domestic firms by foreign companies. Some cases include:

The reason for a policy of economic protectionism in the cases above varied from bid to bid, In the case of Mittal’s bid for Arcelor, the primary concerns involved job security for the Arcelor employees based in France and Luxembourg. The cases of French Suez and Spanish Endesa involved the desire for respective European governments to create a ‘national champion’ capable of competing at both a European and global level. Both the French and US government used national security as the reason for opposing takeovers of Danone, Unocal, and the bid by DP World for 6 US ports. In none of the examples given above was the original bid deemed to be against the interests of competition. In many cases the shareholders supported the foreign bid. For instance in France after the bid for Suez by Enel was counteracted by the French public energy and gas company Gaz De France the shareholders of Suez complained and the unions of Gaz De France were in an uproar because of the privatization of their jobs.

Economic patriotism is the coordinated and promoted behaviour of consumers or companies (both private and public) that consists of favoring the goods or services produced in their country or in their group of countries. Economic patriotism can be practiced either through demand stimulation (encouraging consumers to purchase the goods and services of their own country) or through supply protection, the shielding of the domestic market from foreign competition through tariffs or quotas (protectionism). A recently emerging form of economic patriotism is financial protectionism, the hostility against acquisitions by foreign groups of companies considered of “strategic value”[9] for the economy of the country.

The objective is to support economic activity and promote social cohesion. The supporters of economic patriotism describe it as a kind of self-defence of local economic interests (national or European in case of the countries of the European Union). Some manifestations of economic patriotism are attempts to block foreign competition or acquisitions of domestic companies. An often cited example is France, where economic patriotism was the main rationale used in the Pepsico-Danone, Mittal-Arcelor, and GDF-Suez affairs.

In the United States, an example of economic patriotism would be the numerous bumper stickers: “Be American, Buy American”.

Consumer preference for local goods gives local producers more market power, affording them the ability to lift prices to extract greater profits. Firms that produce locally produced goods can charge a premium for that good. Consumers who favor products by local producers may end up being exploited by profit-maximizing local producers.[10] For example; a protectionist policy in America placed tariffs on foreign cars, giving local producers (Ford and GM market) market power that allowed them to raise the price of cars, which negatively affected American consumers who faced fewer choices and higher prices.[11]

Locally produced goods can attract a premium if consumers show a preference towards it, so firms have an incentive to pass foreign goods off as local goods if foreign goods have cheaper costs of production than local goods.[10] This is a viable strategy because the line between foreign-made and locally-made is blurry. However as supply chains expand globally, the definition of local goods becomes hazy. For example, while a particular car may be assembled in America, its engine may be made in another country such as China. Furthermore, while the engine may be made in China, the engine’s components may be imported from several other countries: the pistons may come from Germany and the spark plugs may come from Mexico. The components that make up the spark plugs and pistons may come from different countries and so on.

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