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Foreign businesses complain of ill treatment at their own peril. Those that publicly criticize Chinese regulatory policies often become targets of vindictive officials. Retribution is so prevalent that Michael Punke, the U.S. ambassador to the WTO, bluntly demanded that China stop punishing whistle-blowers in a speech last November. "China's trading partners have heard from their enterprises on too many occasions that Chinese regulatory authorities threaten to withhold necessary approvals or take other retaliatory actions against foreign enterprises if they speak out against problematic Chinese policies or are perceived as responding cooperatively to their governments' efforts to challenge them," he said.
The NDRC, in its written response to TIME, stressed that China "has always put using foreign investment as an important part of the basic national policy." The agency said it is "continuously improving the market system to provide a fair, stable and transparent investment environment to foreign investors" and insisted that "there is no case that the regulatory hurdles [for foreign businesses] have been increased."
Wind Breakers
Foreign firms that intrude into industries considered strategic by the Chinese government run into even bigger problems. Just ask Wolfgang Jssen. In 2009, Jssen became CEO of a China-based joint venture between German wind-energy firm REpower (now a subsidiary of India's Suzlon) and a Chinese industrial company, hoping to sell advanced turbines in the fast-growing Chinese market. Beijing, however, targeted wind turbines for local development and found ways to favor Chinese manufacturers. The REpower venture, formed in 2006, had already jumped over one major hurdle--a law that required turbines acquired for new projects in China to have 70% of their components made locally. The law, which was later rescinded, forced REpower to build an extensive supply chain in China.
That effort, in the end, made little difference. Jssen says he ran into a government procurement process rigged to promote local players. By making price the primary criterion for awarding bids on new, large wind-farm projects, the government eliminated foreign makers' advantage in quality and technology, favoring Chinese manufacturers that could offer lower prices because of bigger scale and other factors. The contracts often went to state-owned enterprises, which a 2011 AmCham report said "dominate the market by competing with below-cost bids made possible by generous government subsidies." REpower, Jssen says, was effectively shut out. By 2010, REpower's Chinese factory stopped producing turbines, and last year the firm decided to sell its stake in the Chinese venture. Jssen departed in March. "They protected their own market," he says. "It is a state policy that they decided this is a strategic industry, we want to take control of our own market, and then we are going global."