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Companies may cut China investment: group

The potential threat to investment could be a setback to Chinese government efforts to reverse a sharp economic downturn. The Cabinet said last week it wants more private sector spending but gave no indication whether foreign companies would be eligible for tax cuts and other proposed incentives.

Tensions over Beijing's industrial policies have led to a volley of trade complaints.

The U.S. Commerce Department concluded this month that Chinese manufacturers were selling solar power equipment below fair value and proposed imposing a 31 percent tariff. Beijing fired back with a ruling by its Commerce Ministry that Washington's support for six renewable energy projects in the United States violated free-trade commitments.

On Friday, Beijing filed a case with the World Trade Organization in Geneva challenging U.S. anti-dumping and other measures against 22 types of Chinese goods.

As for Europe, the EU is preparing to launch a trade case against Beijing after concluding Chinese telecoms equipment producers receive improper subsidies, the Financial Times newspaper reported last week.

Chinese leaders including Premier Wen Jiabao, the top economic official, have publicly assured foreign companies they are welcome in China and have changed some rules that favored local competitors. But in many areas, foreign companies complain they are blocked by Beijing's efforts to nurture Chinese industry.

A March report by the American Chamber of Commerce cited problems including restrictions on investment in some areas and pressure for foreign companies to hand over technology to Chinese partners.

Cucino noted that while Wen and other top leaders have promising to open more areas of the economy to foreign companies, the Finance Ministry last week ordered local agencies to buy Chinese goods.

Companies have to look “not to the statement but to the facts,” Cucino said.

Cucino also appealed to Chinese authorities to treat foreign companies equally with state-owned Chinese enterprises and to promote free-market competition.

The World Bank and private sector analysts have urged similar steps, warning that they are needed to keep China's economy growing.

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