US Companies Report Tempered Optimism amid Moderating Growth, Rising Costs, and Persistent Market Barriers
WASHINGTON, DC, October 10, 2013 - The US-China Business Council (USCBC) surveys its member companies each year to gauge China’s business climate and assess the top challenges faced by companies doing business there. As China’s economy has slowed over the past year, USCBC’s survey results indicate that companies face business and market access issues in an economy that for the past five years has been a rare bright spot in a difficult global downturn.
Today USCBC, an organization representing roughly 220 US companies selling American goods and services in China, released its 2013 China Business Environment Survey. USCBC President John Frisbie issued the following statement:
“Tempered optimism sums up corporate America’s view of the China business environment for the second year in a row. While most respondents to the US-China Business Council’s annual survey report that China remains among their company’s top five priorities, fewer respondents this year ranked China as their top priority.
“For the second consecutive year, respondents suggested that companies’ optimism about the prospects for the market in the next five years has moderated. Rising costs for labor, lax intellectual property rights enforcement, competition with Chinese companies, and challenges with the licensing and business approval process continue to rank as the top issues of concern to foreign companies doing business in China.
“Respondents most frequently claimed to have experienced protectionism in licensing and regulatory approvals, while also noting discriminatory enforcement and preferential policies favoring domestic Chinese companies in many forms. Fundamentally, USCBC’s membership continues to see a significant difference in how foreign companies are treated, both formally and informally, versus their domestic Chinese counterparts.
“USCBC believes the solution to these problems should include a change of approach by China’s government to foreign investment in its country. Companies incorporated in China should be treated equally, regardless of ownership. Once a foreign company invests and incorporates in the United States, for example, the resulting US entity is treated the same as any other US company under US laws and regulations. This approach is one that China should adopt as well.
“A positive data point from this year’s survey is that US companies continue to see growth and profitability in China, even at moderated rates. More than 90 percent of survey respondents report that their China operations are profitable, the highest percentage reported since USCBC began surveying its membership in 2006. USCBC estimates that China is roughly a $300 billion market for American companies— and would be much larger without the market access barriers. That number underscores why reducing market access and other barriers in China is so important.
“Progress on these issues is often frustratingly slow. Nonetheless, the business community and policymakers must continue to seek practical solutions through expanded engagement. USCBC believes the business community must play an important role in identifying the policies that are problematic and recommending specific ways to address them. USCBC will continue to use this solutions-focused approach in its advocacy with both governments.”
The top 10 challenges cited by USCBC member companies are:
#1 Cost increases
#2 Competition with Chinese enterprises (state-owned or private)
#3 (tie) Administrative licensing
#3 (tie) Human resources: Talent recruitment and retention
#5 Intellectual property rights enforcement
#6 Uneven enforcement or implementation of Chinese laws and policies
#7 Nondiscrimination / National treatment
#9 Standards and conformity assessment
#10 Foreign investment restrictions
Find the complete report and executive summary here.