Companies of the world, are you ready?

The alluring Chinese market will be fully opened to foreign investment on December 11, marking the end of the country's transitional period of its World Trade Organization accession.

As this threshold mark nears, the European Chamber of Commerce and American Chamber of Commerce (AmCham) have both issued their reports on their member nations' business operations in China, analyzing problems and looking for future solutions at a critical time in China's market opening.

But let's first get rid of any abstract talk and go right to the tense scene of competition at Beijing's fourth automobile exhibition, which attracted 600,000 spectators in a mere nine-day showcase on November 18-27. And underneath the exhibition's magnificent splendor were the manufacturers' racked nerves.

Volkswagen was there, feeling the tense air. Currently, the market share of Volkswagen in China has rebounded to 17.5 percent, and its business executives are leading the company to rejuvenation in the Chinese market. However, to Volkswagen's displeasure, in the same exhibition this year, the debut of the attractive Chrysler 300C was also a magnet for Chinese viewers, who were eager to have a glimpse at the localized Chrysler vehicle.

Then there was Chery Automobile, an emerging Chinese automaker targeting the low-end market. Its QQ series of cars, costing no more than 40,000 yuan each, wins Chery many younger fans. The Chrysler 300C, at 400,000 yuan, is way too expensive for an ordinary Chinese buyer.

This is China now, a land of international competition where multinationals go up against competitors on Chinese soil while fending off homegrown rivals.

To some extent, that has the American and European chambers of commerce in China in an uproar, doing what they can to create more favorable conditions for the companies they represent. But in listing their complaints, they have suggested compelling differences in the way America and Europe are looking to succeed in the Chinese market. While European business largely wants to change Chinese policies, American ones are beginning to look back home for solutions to better business. That may not be a bad idea, because as Ministry of Commerce researcher Mei Xinyu says, Europe has the edge in at least one important industry because of U.S. bureaucratic bumbling.

The buck stops where?

When embracing the enormous opportunities brought about by a more open Chinese market, European companies and U.S. ones are vaguely uneasy. Who will get the lion's share, and what problems are hindering their expansion and profitability?

"While the survey shows American companies continue to be bullish on China, they are facing increased competition on a number of fronts," said the 2006 China Business Report by AmCham.

Further, increasing labor costs and operational costs had been squeezing companies' profit margins, the chamber found. Meanwhile, U.S. companies are getting price pressure and direct competition from domestic companies. "Those two factors are taking a toll on the bottom line of AmCham companies," Laurie Underwood, Communications Director of AmCham in Shanghai, told China Radio International.

But AmCham doesn't see the source of all its companies' problems in China. It puts a lot of stress on policies that need to be changed in the United States.

AmCham noted that the United States' lengthy and uncertain visa process and sometimes embarrassing entry requirements due to security remain a distinct deterrent to "buying American."

Indeed, 44 percent of survey respondents said they had lost significant sales as a result of U.S. visa issues. Almost 70 percent said they now avoid arranging meetings in the United States because of concerns about obtaining a visa for their customers.

Further, although 75 percent of companies that increased their exports to China were profitable, U.S. exporters seem to be less competitive in capturing China market share. AmCham blamed this on insufficient government trade support, noting that Japan and Germany each have substantial government offices and industry organizations to promote trade.

The chamber also attacked U.S. export policy. For safety concerns, the United States strictly controls the exportation of military technology. But AmCham alleged that the technology can be purchased from non-U.S. sources, which diverts business to U.S. competitors.

"All branches of the U.S. government need to recognize that our failure to take full advantage of the opportunity that China presents is contributing to our bilateral trade deficit," the AmCham report said. In 2005, the U.S. trade deficit with China stood at $201.6 billion, and that of EU was 106.0 billion euros.

But strikingly different from AmCham's inward national criticism, the European Union Chamber of Commerce policy paper tended to pressure the Chinese side rather than seek internal solutions.

For instance, while American companies are calling for loosened U.S. government control on certain technologies, especially military technologies, the European Union complained that transferring proprietary technology to China was often made a precondition of bidding on Chinese government projects. The EU chamber added that China imposes local content requirements, which limits EU exports and unfairly aids the local industry.

Which region has it better?

The overall strength of American companies cannot be questioned, said Mei with the Ministry of Commerce.

But, according to latest data from the General Administration of Customs of China, from January to October, the EU continued to be the country's largest trading partner, with EU-China bilateral trade reaching $218.9 billion and rising 24.2 percent over the previous year. The United States was the second largest, with bilateral trade volume of $214.52 billion and a year-on-year growth of 24.6 percent.

The EU is particularly strong in terms of exporting technology, as it is the largest technology exporter to the country.

Statistics from China's Ministry of Commerce show that in the first 10 months of this year, China and the EU signed 2,124 contracts of technology introduction valued at $7.78 billion, accounting for 41.5 percent of the total contractual value of technology introduction. But the United States ranked third following Japan, and held 16.6 percent.

"In terms of mechanical and electrical products bearing more technology content, European companies are more competitive because EU officials are positive in enacting favorable policies promoting hi-tech cooperation with China while the United States imposes strict control over technologies," Mei said. "No other trade community can compare to the EU in terms of the high level of technology cooperation with China."

In comparing the competitiveness and opportunities of EU companies and American companies, Mei noted, "The advantage of EU companies is that the trade policies of their home countries are relatively relaxed. The American companies possess more advanced technology but the problem is the U.S. stubborn export control over hi-tech products and the visa problems."

When Beijing Review asked which region has brighter business prospects in China, Mei pointed out, "EU companies may take the lead in mechanical and electrical products, the IT industry will be led by U.S. companies, while in terms of luxury commodities, European companies definitely own a competitive edge."