USCBC 2017 China Business Environment Member Survey

The US-China Business Council has released the key findings of its 2017 Annual Member Survey. For the past 12 years, USCBC has polled its members on their business performance in China and their priority issues.

Two main takeaways

1. Market Improvement (If You Have Access) 

• Improved sales performance versus a year ago: 75 percent expect revenue to increase this year (versus 62 percent last year); 9 percent expect revenue to decline (down from 17 percent).

• Sales growth is slowing overall in line with China’s rate of GDP growth slowing, but 40 percent of respondents still saw double-digit sales growth last year.

• Sixty-four percent of companies saw improved profitability of their China operations in the last year.  Profit margins in China versus operations in the rest of the world are a mixed bag – one-third report their China operations do better than their operations in other markets, one-third worse, one-third the same.

• Biggest restraints on profitability? Domestic competition, for the sixth year in a row. No. 2 is government policies/regulation, No. 3 is Rising costs.

• Thirty-six percent have increased market share versus three years ago; 20 percent have lost market share.

• Rising costs are a concern for nearly 90 percent of companies. Clear cost driver of most concern: human resources.

• Forty-eight percent of companies are expanding resources in China; only 8 percent are contracting. But investment is focused on expanding current facilities, commercial footprint, and headcount, rather than investing in new facilities.

• Important context: 68 percent say growth prospects in China are better than in other markets around the world; only 9 percent said they are worse.

• The key question: Can you access the market? 

2. Policy Environment Uncertain, Regulatory Barriers Unchanged

• Forty-eight percent of companies are less optimistic about the business climate than three years ago, only 11 percent are more optimistic.

• Main reason:  China’s policy environment. 57 percent have seen no impact from economic reforms announced 4 years ago.

• Tech transfer to gain market access is an acute issue for those who face it; nearly 20 percent have been asked to transfer technology during the past three years. JV requirements and government approvals provide leverage to China.

• Ninety-four percent remain concerned about IP protection.

• Eighty-two percent are concerned about the impact of China’s cyber and data regulations on business operations.

• A high-standard bilateral investment treaty (BIT) with China would positively address each of the top 5 challenges.

Top 10 Challenges

1. Competition with Chinese Companies
2. Licenses & Approvals
3. Investment Barriers
4. Uneven Enforcement 
5. IPR Enforcement
6. Cybersecurity
7. Cost Increases
8. US-China Relations
9. Data Flow Barriers
10. Capital Controls 

Read the full report here.