State control over Chinese economy to grow - German engineers

[October 16, 2018]  BERLIN (Reuters) - China is likely to strengthen state control over the economy in the coming years despite tentative signs of an opening, Germany's VDMA mechanical engineering association said on Tuesday.

Men work on a car at the assembly line of the Volvo Cars manufacturing plant in Daqing, Heilongjiang province, China June 8, 2018. Picture taken June 8, 2018. REUTERS/Stringer

In a paper on the Chinese market presented at its annual conference in Berlin, the VDMA also urged the German government to maintain political pressure on Beijing, saying this was the only way to secure the future of German companies in China.

"The Chinese market is primarily a politically-driven market that is shaped, controlled and steered through the intervention of the state," the paper said. "All signs suggest that this tendency will strengthen in the coming years."

Under pressure from the United States and Europe to open up its market to foreign investment, China has taken a number of steps in recent months, including allowing Germany's BASF <BASFn.DE> and U.S. giant ExxonMobil <XOM.N> to invest in major chemical sites.

Last week, German's BMW <BMWG.DE> announced that it would take control of its main joint venture in China, a first for a foreign carmaker.

But foreign companies remain concerned about what they see as a growing state role in the economy under President Xi Jinping, including the introduction of a Social Credit System using big data to monitor, shape and rate individuals and businesses.

The VDMA said it saw "significant challenges" for all companies in China resulting from this system.

Still, the association said that China remained a major market, with Chinese imports of foreign machinery totalling $76.8 billion in the first half of 2018.

(Reporting by Noah Barkin; Editing by Paul Carrel)

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