2010-08-18 09:17

A shopper at a store selling Microsoft software in Shanghai. [Kevin Lee / Bloomberg]

BEIJING - China's recent drive to support domestic technologies has raised increasing concerns from some foreign firms who fear that the country's "indigenous innovation" policy may discriminate against foreign companies or force them to transfer their intellectual property to China.

But that does not mean that China's business environment is getting worse, according to a top executive from the US software giant Microsoft.

Michel van der Bel, chief operating officer of Microsoft China, said in an interview that China's business environment is becoming "not so much worse as more complex".

"Worse means that our business is going down - but no, that's not the case," said Van der Bel. "But it is getting more complex, as there are more forces in the Chinese market that have a say in what to do."

He said the Chinese government has made more clear its support for domestic innovation, in which multinational companies are also included. He noted that he is still optimistic about the opportunities provided by China.

China's leaders began emphasizing the policy of "indigenous innovation" in 2006, but it emerged as a major issue for foreign businesses after the publication in November of rules for creating a national list of products containing indigenous innovation. Foreign companies feared that would shut them out of tens of billions of dollars in government procurement contracts.

Companies including Siemens, General Electric and Intel have expressed concerns over the policy in the past few months.

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However, Wang Zhile, director of the research center on transnational corporations under China's Ministry of Commerce, said foreign concerns and doubts over China's "reform and opening up" policy have emerged every three to four years. But each time, China goes further in its transformation to an open society and market economy.

In early April, the State Council issued new FDI development guidelines which include preferential policies for land use and tax, encouraging investment in the renewable energy, high-tech and service sectors, and moving into central and western areas of the country.

The guidelines include a measure allowing local authorities to approve foreign projects of up to $300 million, compared with a previous cap of $100 million.

Wang said: "It is an undeniable truth that there were cases of restrictions and discrimination involving the operations of foreign enterprises in China in the past few years, but the guidelines will make this a thing of the past as they provide real measures to improve the investment environment," said Wang.

Van der Bel from Microsoft said he believes the government's efforts to encourage domestic innovation may not necessarily hurt multinational companies.