FOR IMMEDIATE RELEASE
Contacts in Washington, DC:
John Frisbie (jfrisbie@uschina.org), Erin Ennis (eennis@uschina.org)
202-429-0340
Contact in Beijing:
Robert Poole (rpoole@uschina.org.cn)
86-10-6592-0727
US Companies' China Outlook: Market Growth,
Tempered by Bureaucratic, Cost Challenges
Washington, DC, October 9, 2008 - The US-China Business Council's (USCBC) annual survey of the China business environment finds that its member companies continue to increase sales and profitability in the third-largest market for US exports--a market that is significantly larger when goods that are made and sold in China by US companies operating there are included.
At the same time, companies remain frustrated by bureaucratic barriers to market expansion and shortages of local managerial and other personnel. And, though optimistic about growth prospects, USCBC companies express rising concerns about PRC government policies under development that might restrict future growth in many key industries.
The full report is available at www.uschina.org/public/documents/2008/10/uscbc-member-survey.pdf.
USCBC members highlighted the following concerns:
USCBC Members' Top 10 Issues
- (Tie) Administrative licensing
- (Tie) Human resources:
Talent recruitment and retention
- Cost increases
- Transparency
- Uneven enforcement of PRC laws
- Intellectual property rights enforcement
- Competition and overcapacity
- Developing sales and distribution channels
- PRC Customs and trade administration
- Protectionism in China
- Administrative licensing Last year's number-two issue, companies find China's business- and product-licensing bureaucracy a major headache, with no improvement over the past 12 months. The slow, opaque, and inconsistent licensing process impedes both market entry and subsequent expansion.
- Human resources Finding and keeping top and mid-level local talent in a competitive hiring environment remains a day-to-day challenge. Salary increases in some fields can top 20 percent per year. This was the top issue in the survey for the past three years.
- Rising costs As forecast in last year's survey, rising costs rocketed into the top 10 this year, in the form of higher costs for labor, materials, and taxes.
- Rule of law Legal issues remain firmly in the top 10, with insufficient regulatory transparency, uneven enforcement of laws, and inadequate intellectual property rights protection all in the top 10--despite some improvements in all three.
The Path Ahead: Optimism, Yet Rising Concerns about Economic Nationalism
- USCBC members remain optimistic about expanding their businesses in China, with 90 percent optimistic or somewhat optimistic about prospects over the next five years.
- Concerns about protectionism in China remain a top 10 issue, however. Policies under development that might restrict investment expansion, favor domestic technologies and product standards, and protect certain "pillar" industries and "national champions" have 82 percent of respondents very or somewhat concerned.
Once Again, Some Results Correct Popular Misperceptions
- US companies invest in China to reach the China market Ninety-two percent of respondents cite this as their main objective for establishing operations there. Far behind are investments made to export to other markets (26 percent) or the US market (23 percent). So, who is doing all that exporting from China? Much of it is from Asian companies that have been exporting to the United States for decades--but now have facilities in China. The rising costs cited above may be affecting those companies most.
- Companies can make money in China Eighty-eight percent of respondents say they are profitable in China, and 81 percent say their profit margins in China are the same or better than their company's global margins.
- US companies serve as models for better business practices and working conditions in China Eighty-three percent of respondents pay higher wages than their domestic counterparts. More than 90 percent bring their global workplace safety practices to their China facilities, which two-thirds say exceed local requirements.
The US-China Business Council (USCBC, www.uschina.org) is the leading organization of US companies engaged in business with the People's Republic of China. Founded in 1973, USCBC provides extensive China-focused information, advisory and advocacy services, and events to roughly 250 US corporations operating within the United States and throughout Asia.