Is China Hampering Its Own Growth?

A recent article over on on how US firms [are] criticising ‘unclear’ Chinese purchasing rules, just like their EU counterparts did last month, had a fairly shocking number: the EU states that inconsistent and poorly implemented legislation caused China to miss out on 1 Trillion of new Business. In other words, it missed out on business equal to 20% of its GDP! For a country that is obviously seeking to regain global dominance, that’s a lot to lose out on.

The blame is being placed on government procurement policies that favour domestic or “indigenous innvation” and the need for foreign firms to transfer IP, licenses, or technology to domestic firms to win business, a requirement looked upon very unfavourably by western firms. And while China may argue strongly for the protectionist rule, just like certain American politicians argue strongly for the Buy American provisions in the recent stimulus bill and the Buy American Act passed in 1933, there is a price to be paid. Every dollar of foreign investment that is deterred to another country in the BRIC keeps them one step further from GDP dominance and every opportunity missed to use a foreign firm makes it that much harder for them to get their hands on leading innovations from around the world.

It’s their country, their choice, and a tough call either way with two thirds of their country still considered poor by global (world bank) standards.