A worker at a container center for the Chongqing-Xinjiang-Europe Railway in Southwest China's Chongqing Municipality in March Photo: VCG

Expressing concern

Most European companies plan to expand their operations in China in 2019 despite an escalation of the China-US trade war, with many still regarding China as a top investment destination, a European business report showed, highlighting a trend of closer China-Europe ties to cushion against uncertainty from the protracted trade row.While identifying opportunities, the report also listed many factors, including China's economic slowdown, rising labor costs and claims of forced technology transfers as shadows over their business prospect. Chinese analysts said the country will only tackle these issues as long as they are reasonable requests.European companies remain dedicated to doing business in China, with 62 percent of the respondents viewing China among the top three current and future investment destinations and 56 percent looking to increase their business in China this year, according to the Business Confidence Survey 2019 released by the European Union Chamber of Commerce in China (EUCCC) on Monday."China - with its market size and untapped growth potential - remains a critical market for European companies, dispelling the notion of economic decoupling," Mats Harborn, president of the EUCCC, said at a press conference in Beijing where the report was released.In 2018, about 75 percent of the European respondents reported positive earnings for their companies in China, the second-highest level in a decade, the report showed. Meanwhile, 39 percent of the respondents said their profit margins in China were higher than their worldwide average, which was the highest percentage since 2012.Chinese analysts said that the European companies' keen interest in the Chinese market showed their eagerness to strengthen cooperation with China, as US President Donald Trump's "America First" strategy and tariff threats unnerve them."The traditional US allies now worry about losing more from global uncertainties. The rising protectionism and trade war between the world's largest economies could have an effect on EU's interests, but EU-based companies have realized that they must join hands with China and establish more effective cooperation mechanisms to cope with it," Cong Yi, a professor at the Tianjin University of Finance and Economics, told the Global Times on Monday.The survey results showed that European companies have growing concerns on the impact of an escalation of the trade war on their businesses, with 25 percent of the respondents saying that the current tariffs have affected their US-bound exports. But a majority of European companies have not yet changed their business strategies -- instead, they're monitoring the situation closely.China's opening-up of its market and improved business environment also seem to weigh heavily in European companies' decisions to invest in China.About 40 percent of the European companies saw increased market access in their respective industries, the report showed. As a result, one-quarter of members reported feeling more welcome now, than when they first entered the Chinese market.If China further opened up its markets, 65 percent of European companies would be likely to increase investment, the report added.Despite bolstered confidence, the European business community is also looking at such factors as China's economic slowdown and rising labor costs, which they said could dampen their business outlook.But Chinese analysts warned that as Chinese manufacturers upgraded, transformed and moved up in the ladder of the global industrial chain, EU companies should no longer deem China as a source of cheaper labor or view it as the world's factory."To survive and thrive in China, they should come to the market with innovation. China's economy is shifting from quantity to quality growth, and European companies should adjust accordingly, or they will be squeezed out by their Chinese rivals," Cong suggested.In 2019, about 62 percent of the respondents reported that Chinese companies were equally or more innovative than their European peers, the report showed.Echoing the EU's role as a US ally, the business confidence report also included criticisms of China's alleged technology transfers, which have been repeatedly denied by Chinese officials, as well as raising doubts on the principle of competitive neutrality.About 20 percent of respondents said they felt compelled to transfer technology as a condition for market access. Only one-third expected the competitive neutrality rule to be implemented in the next two to five years.In response to the accusation, Foreign Ministry spokesperson Lu Kang said at a press briefing on Monday that China respects intellectual property rights protection and has never issued any policy that forces foreign companies to transfer technology to Chinese companies."Technology transfer is a result of voluntary cooperation between market entities. It is win-win cooperation in substance," Lu said. He added that if European companies that have such concerns could show solid evidence that proves the accusation, China will definitely solve the issue. Otherwise, China opposes fabricating accusations without evidence."The alleged 'forced technology' is all about business negotiations, as technology can be sold at market prices. The European companies want it both ways: They want the Chinese market and Chinese money but also hope to maintain a monopoly on high technology. How is this possible?" Bai Ming, deputy director of the Ministry of Commerce 's International Market Research Institute, told the Global Times on Monday."China will only respond to reasonable requests raised by the business community. For those who 'ask for the moon,' we will never yield to them," Bai said.While state-owned enterprises did have a time when they had the upper hand in doing business, the Chinese government is making efforts, such as launching mixed-ownership reform, to change the situation, analysts said."It is a gradual process, and you cannot expect changes overnight," Cong noted.