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Vodafone joins queue of firms to leave China
Published on: 2010-08-30
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The British mobile group holds a fifth of the free float of China Mobile, the world’s biggest operator with 554m customers. It is weighing options for an open sale of shares on the Hong Kong stockmarket, or through a direct deal with a strategic player.

Few company chiefs speak out against China for fear of hurting their prospects, but their numbers have been swelling recently. Peter Loescher from Siemens and Jürgen Hambrecht from Germany’s chemical group BASF told premier Wen Jiabao last month that the playing field in China is increasingly tilted against foreigners.

Jeff Immelt, the head of GE, vented his frustrations in Rome, complaining that the company’s efforts to gain a foothold in China were failing to pay off. “It’s getting harder for foreign companies to do business there. I am not sure that in the end they want any of us to win, or to be successful,” he said.

GE is moving production of its hybrid water heaters to Kentucky, saying rising Chinese labour costs and shipping costs make it more competitive to produce locally for the US market.

Steve Balmer from Microsoft said early this year that China’s software piracy was a constant thorn in the side. “China is a less interesting market to us than India or Indonesia,” he said.

The American and European chambers of commerce in Beijing have issued reports about subtle barriers, dubbed the “Great Wall of China”. They are particularly concerned by China’s central bank’s actions to hold down the yuan.

The European chamber said the investment climate in China was on a “declining trend”, as moves to open up the economy and lift curbs on foreign capital had reached stagnation. It said Beijing’s “Indigenous Innovation Policy,” uses procurement incentives to help Chinese firms at the expense of foreigners in fields such as software and clean-tech.

The US chamber said its survey found that 38pc of its members felt “unwelcome in the Chinese market”, up from 23pc in 2008. China is also becoming a more expensive place to operate, with rigid labour contracts that make it hard to fire workers and a rising tax burden.

Vodafone had once hoped to be the Coca-Cola of mobile phones, present in every corner of the world, so the retreat from China is a setback. The company continues to develop software with China Telecom, but plans to focus on

its core markets of Europe, Africa and India.

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