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China WTO Proposal Is Disappointing for Foreign Multinationals

China looks to be in no hurry to join the procurement agreement in the way Europe wants. Its official Xinhua News agency said earlier in the year that joining in 2012 was probably out because of "increased standards set by developed nations." China must also first "rectify some of its domestic regulations before it can join the agreement," Xinhua said, citing the Chinese commerce ministry.

With the European Chamber airing its grievances in public, a rare move these days as almost everyone wants to keep bridges standing with the world's economic powerhouse, China will only get testier. (Hint: What does it have to lose?) Beijing has already hit back at Europe, saying it blocks Chinese contractors from doing massive infrastructure projects such as airports.

"Even though (Europe) is much more open; they are blaming the West," says Gilbert van Kerckhove, Chair of the chamber's Public Procurement Working Group. "Their markets have been very much restricted. They would be 2% open, but they would open 100% in Europe."

But if you're invested in a company that sells cars and photo copiers to government offices, consider buying more shares.

Cars by General Motors (GM) and Volkswagen (VLKAY) have been among the country's historical favorites, especially as both are made in China through local joint ventures.

The government has gotten more squeamish about car purchases to avoid being seen living too large, however, and purely local firms are expected to do especially well as the government seeks to boost domestic brands.

But last year GM claimed China's best-selling passenger vehicle, the compact Excelle. Excelle sales hit 254,000, and you've got to figure some of those are parked behind the ministry of you-name-it.

The odds might be even better if the car is a Jetta or Passat, as VW's China sales grew faster than GM's in the third quarter this year. One possible cause: Massive city-regulated taxi fleets in much of China prefer to buy VW models.

Back at the office, I'd copy off a few ballots for Fuji Xerox. The joint venture between FUJIFILM (FUJI) and the venerable electronics maker Xerox was the second largest seller of office printing equipment provider in China last year, Chinese media say. Its leaders have been quoted saying they expect to keep growing in China.

The lack of a WTO procurement deal best serves the local guys, of course. I'm talking again, as I did in July, about government-run giants such as China State Construction Engineering (601668.SS) and railway contractor China Railway Construction (1186.HKG). If their share prices drop, it's not for lack of work.

The author has no positions in the shares of companies named in this column.

Follow Ralph Jennings on Twitter at @ChinaWatchRalph.
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