Sales rebound for American companies in China, but regulatory barriers continue to limit market access and undermine confidence
FOR IMMEDIATE RELEASE
Sulaiman Kenyatta ([email protected])
Washington, DC, December 6, 2017 - American companies have seen improved sales performance in China over the last year, but full market access continues to be a challenge for many American companies, according to the US-China Business Council’s (USCBC) most recent annual member survey. Those issues, combined with uncertainties about China’s policies toward foreign companies, are undermining American companies’ confidence in China’s market.
“The China market delivered improved sales for American companies in the past year for companies with market access,,” said USCBC president John Frisbie. “At the same time, most of the regulatory challenges that companies face each day did not see improvement this year. The stagnation in implementation of needed economic reforms are undermining confidence among American companies that their concerns will be addressed.”
Frisbie continued, “These are all issues that China has talked about addressing. Implementing genuine market liberalizations and addressing discriminatory treatment against foreign companies is essential, not only to rebuild business confidence, but to ensure that US-China commercial relations remain on sure footing.”
Positive findings from the survey:
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.
64 percent of companies saw improved profitability in their China operations in the last year. Profit margins in China versus operations in the rest of the world are mixed – 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.
68 percent say growth prospects in China are better than in other markets around the world; only 9 percent said they are worse.
But the survey reports that challenges remain:
40 percent of companies are less optimistic about the business climate than three years ago; only 11 percent are more optimistic. The main reason: China’s policy environment. 57 percent have seen no impact from economic reforms announced 4 years ago.
Tech transfer requirements to gain access to the China market is an acute issue for those who face it; nearly 20 percent of companies in the survey have been asked to transfer technology during the past three years. JV requirements and government approvals provide leverage to China.
94 percent of respondents remain concerned about intellectual property (IP) protection.
A high-standard bilateral investment treaty (BIT) with China would positively address each of the top 5 challenges.
Top 10 challenges for American companies in China
1. Competition with Chinese companies
2. Licenses and approvals
3. Investment barriers
4. Uneven enforcement
5. IPR enforcement
7. Cost increases
8. US-China relations
9. Data flow barriers
10. Capital controls