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Group calls for SOE reforms, more opening



A Chinese flag on the broken bridge that once connected the Chinese border town of Dandong, Liaoning Province, and the North Korean city of Sinuiju.

Greg Baker | AFP | Getty Images

China's efforts to open its economy were not enough to improve foreigners' access to the single market, according to a paper released Tuesday by the European Union Chamber of Commerce in China.

A big hurdle According to the newspaper, foreign companies operating in China are confronted with state-owned enterprises in China. These companies, also known as SOEs, are given preferential treatment by the government, for example the priority to obtain funding ̵

1; and this special treatment has distorted competition in many industries, according to the report.

The situation with the Chinese government has worsened in recent years "Continuation of SOE reform with Chinese characteristics", she added.

"Instead of reducing the SOEs to a manageable size, determining the sectors most suitable for them and privatizing the rest, the goal was to achieve this" Stronger, better and bigger, "wrote Chamber President Jörg Wuttke In the report, Wuttke spoke on Tuesday with CNBC's "Squawk Box Asia" about the fact that China has made some progress in restructuring its economy in China in recent years.But the authorities seem to support growth by making more money

"Sometimes you want China to wake up and see that you can not just throw money You really have to change the structure," he said. [19659009"ItisnotthatthecountryisinastalematebutwealsoseethattheopeningbyinterestgroupsthatdonotdosoisquitedisruptiveWebelievethatnowisthetimetodosobecauseoftheeconomicheadwind"Wuttkeexplained

China's SOE reforms

The growth of the Chinese economy – the second largest in the world – is slowing down at a time when the trade war with the US is likely to drag on.

Several economists have warned that the tariff dispute will affect the Chinese economy more than the US, as the Asian country is relatively more dependent on trade.

In the face of such headwinds, it's time for the Chinese government to focus on making the economy more competitive, Wuttke said. He pointed out that China had some success in liberalizing its economy in southern Guangdong province.

In Guangdong, China developed a first special economic zone that attracted foreign investors and allowed companies to "pursue their own ambitions," according to the paper. This has helped the province grow faster than some northern provinces, where state-owned enterprises still dominate the economy, according to the report. "Strong ties in the past have prevented significant reform of the SOE and will certainly continue to have an impact in this regard."

"Failure to tackle SOE reform and economic liberalization will inflate the market and create an inefficient public sector burden on the country if it seeks to emerge from the middle-income trap."


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