Chinese Firms Still Battling Abroad

Recent surveys by the European and American Chambers of Commerce show many multinational firms operating in China believe they face unfair competition with domestic firms. Yet these firms are far more successful here than Chinese companies operating in developed markets. This has produced an imbalance in investment, provoking debate about future trade problems. CRI's Dominic Swire reports.

Lunchtime in a well-known American fast food restaurant in Beijing. Business certainly seems to be booming. But many foreign firms still complain about unfair competition with Chinese companies.

John Russell is managing director of Northhead, a PR consultancy operating in Beijing. He acknowledges running a business in China is not easy but says Chinese firms operating abroad face even greater challenges.

"What we are also seeing on the other hand are the challenges for Chinese companies entering developed markets, be it the US or the EU, are significant also. In fact the barriers seem to be even higher and the challenges even more daunting."

One of the biggest obstacles is image. Jo Eatwell is from Chinese branding firm Shishi Ishi, based in London. She says China's image in the west is better than it used to be but still needs to improve.

"to distinguish 'made in China' and a Chinese brand compared to a brand from Japan, Singapore, Malaysia and so on, we need to come up with a sharper edge to bring out this image. At the moment this edge is still not so clear."

Not many Chinese brands are known abroad. But for foreign firms in China, it's a different story. As a result, discounting investment in bonds, there's much more money coming into China from developed nations than leaving it. In 2008, 4.5 billion euros was invested in China from the EU, but less than one percent of that figure went the other way. John Russell from Northhead again.

"What we're seeing from an investment point of view is an asymmetry and lack of balance between American investment in China, European investment in China and Chinese investment into both of those mature markets."

John Russell says correcting this imbalance could rely on many factors such as foreign countries opening to more investment, or Chinese firms improving competitiveness. But he warns of future trade disputes if politics enters the picture.

"Within trade and investment, there's always been a dynamic of quid pro quo. And the last factor I'd identify is where there's more pressure from the Chinese government. Particularly pressure on multinationals in China: 'Why should you be allowed to prosper and be profitable here when our economic operators cannot invest or prosper in your own country or the EU region?'

But not all are so pessimistic. Professor Zhao Zhongxiu is an expert in foreign trade at Beijing's University of International Business and Economics.

"I don't think the government will do this. I think the government will maintain a fair environment for the competition, I don't think the government will help to do this. Firms need to build their own competence, not just basing this on the support of the government."

Chinese firms do appear to be making progress internationally. Market research firm Millward Brown says 12 of the 100 most valuable global brands are now Chinese. That's compared to just 3 from Brazil.

But for now Chinese consumers still love their American fast food.

For China Radio International, I'm Dominic Swire.