Trade barriers

Sao Paulo, the biggest city in Brazil, represents more than 25 percent of the taxes of the country. The city, which has a population of 19 million, ranked No 7 of the top 10 biggest cities in 2010. The economic center of the country is also the place where most of the Chinese companies are setting up their headquarters.

However, its interstate tax rate of up to 18 percent increases the cost of business for many Chinese companies. And red tape also causes problems for companies, from hiring employees to transferring cargo across different Brazilian states.

"The tax system here is very complicated," said Jack Lu, Brazilian market chief representative of the Chinese automaker Chery. "We spent about three years researching and learning about the market before we entered it in 2009."

Trade investigations are emerging as another headache for Chinese companies in the country. There has been an increase in the number of trade complaints filed by Brazil against China. More than 100 anti-dumping investigations were launched by Brazil in 2010 - nearly 50 were against China.

According to Hugueney, the Brazilian ambassador, increased investment in local production is the key to improving trade relations.

"Brazil is seeking more Chinese investment in the manufacturing sector to avoid trade conflicts between the two nations," he said.

Contact the writer at tuoyannan@chinadaily.com.cn