EU business lobby says China losing reform momentum

By Michael Martina BEIJING (Reuters) - The Chinese government is losing momentum in its efforts to reform the slowing economy, a European business lobby said on Tuesday, decrying what it called "protectionist tendencies" against foreign firms on national security grounds. China is headed for its slowest economic expansion in 25 years in 2015 and mainland stock markets have slumped 40 percent since mid-June, sending global financial markets lower. Complaints from the international business community, eager for the ruling Communist Party to implement promised market reforms, have become increasingly vociferous as the downturn has dulled optimism about the pace of liberalisation. Firms are concerned about a suite of new laws dealing with national security that are "detrimental to the credibility of the Chinese marketplace", the European Union Chamber of Commerce in China said in its annual business climate report. "It is now clear that some reform momentum has been lost", the report said, adding that businesses were unsettled by the "markedly slow progress". "The Chinese government must avoid giving in to the protectionist tendencies that are continuing to curtail legitimate market access, whether on the grounds of national security or other concerns," it said. Under President Xi Jinping, China has sought to expand the scope of national security. That has lead critics to complain of vaguely worded rules and discriminatory treatment, particularly for foreign technology firms, which fear being forced to make products in China or use source code released to inspectors, potentially exposing intellectual property. Some of the laws, such as those covering anti-terrorism and cyber security, are still under review, while a sweeping National Security Law, already has been adopted. China says the new laws are critical to countering serious security risks from militant separatism to Internet hacking attacks. Cyber security has been a particularly irksome area in relations with economic partners such as the United States and the European Union, both of which are trying to carve out more space for their companies in China's market through bilateral investment treaties. EU Chamber President Joerg Wuttke told reporters at a briefing that China still had strong potential for growth but that members wanted to see the country's leaders move faster. "We definitely would like to see a stronger sense of urgency going through each and every echelon of the government and not this kind of laid back wait and see attitude," Wuttke said. While the Chamber endorsed the ongoing anti-corruption campaign under Xi, it also "causes jitters" within the government and slowed the implementation of reforms, Wuttke said. (Reporting by Michael Martina; Editing by Kim Coghill)