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China's investment rules, piracy cost EU business $28 bln

Chinese limits on foreign investment and local technical standards that complicated banking and manufacturing cost European companies €21.4 billion ($28 billion) in 2004, the European Union said.

China awards selective government contracts, sanctions the use of unlicensed foreign intellectual property rights, imposes restrictive investment rules, forces manufacturers to use Chinese-made parts and subsidizes local companies, the Brussels- based European Commission said in a 21-page report yesterday. „A complex mix of „behind-the-border” barriers faced by European exporters and investors in China still remains” after China joined the WTO in 2001, the commission says in the report.
„Rampant patent infringement” has discouraged foreign investors from making components and financing research and development in China, the EU said. In 2006, the EU recorded its first full-year trade deficit since 2000, the bloc's statistics office said last week. The 27-nation bloc's trade gap with China jumped 20% to €81.7 billion in the 11 months through November.
The estimated losses to European companies, in industries such as auto production and computer technologies, are mostly the result of counterfeiting or investment restrictions, the report says. The EU, along with the US and Canada, have challenged China at the WTO, complaining that carmakers such as Volkswagen AG and Renault SA operating in China are forced to buy a certain quantity of their components from local suppliers or face higher import duties. That violates pledges China made when it joined the WTO in 2001, the complainants say. (Bloomberg)