Growth Continues Amidst Rising Competition, Policy Uncertainty
Washington, DC, September 29, 2014—The US-China Business Council (USCBC) today released its 2014 China Business Environment Survey, an annual assessment of China’s business climate and a list of the top ten challenges faced by American companies operating there. USCBC’s 2014 survey results indicate that American companies continue to see growth in the China market amidst rising competition and policy uncertainty.
USCBC’s annual survey draws its results from senior executives at its more than 200 member companies. Half of all respondents are China-based, and half are based in the United States, resulting in responses that blend on-the-ground experience with global perspective and context. Eighty-five percent of participating companies have been in the China market for more than 10 years, with the majority bringing more than 20 years of experience to the survey’s results.
Today USCBC President John Frisbie issued the following statement:
“As China’s economy only becomes more important to American companies and workers, it is essential to have a balanced and informed perspective of China’s business environment. The China market continues to deliver important revenue opportunities for American companies, even as GDP growth moderates. Nearly 50 percent of survey respondents report double-digit revenue expansion – fewer than in prior years, but still impressive compared to other markets around the globe. The great majority of US companies remain profitable in the China market, but increasing local competition and rising costs are combining to pressure profit margins.
“One clear trend identified by USCBC’s annual survey is that executive optimism continues to be tempered by policy uncertainty. Companies have seen little tangible impact so far from China’s economic reforms and report little improvement in any of the top 10 issues over the past year. This uncertainty over policy direction is moderating expansion plans. Fifty percent of companies plan to boost resources in China over the next 12 months, down from almost 75 percent just three years ago.
“While American companies report that their primary competition is with other US and foreign companies in China, competition from domestic industry is growing. Some observers focus concern on preferential treatment received by Chinese state-owned enterprises, but survey data shows again that nationality trumps ownership – Chinese companies, whether state-owned or private, receive benefits that foreign companies do not.
“The lingering challenges of protecting intellectual property rights in China are well-known. While the enforcement environment continues to slowly improve, such improvements have been modest. American companies continue to limit their operations and intellectual property exposure in China because of the lack of adequate protections.
“Recruiting and retaining talented staff in China has always been a top challenge, and now China’s environmental pollution is also impacting staffing. Forty percent of companies report that air pollution has made it difficult to retain or assign expatriate staff to China. Pollution has also increased the use of sick leave by expatriate and local staff in China.
“Finally, China’s ramped-up enforcement of its relatively new antitrust and competition regime has garnered significant attention in recent months. While both foreign and domestic companies are being investigated, foreign companies appear to be facing increasing scrutiny. Eighty-six percent of survey respondents are concerned about the lack of transparency, due process, and other issues surrounding competition-related investigations.”
The top 10 challenges cited by USCBC member companies are:
1. Competition with Chinese companies in China
2. Intellectual property rights enforcement
3. Foreign investment restrictions
4. [Tie] Human resources: Talent recruitment and retention
4. [Tie] Cost increases
6. Uneven enforcement/implementation of Chinese laws
9. Nondiscrimination/national treatment
10. Overcapacity in the China market
Find the complete report and executive summary here http://uschina.org/reports/uscbc-2014-china-business-environment-survey-results.
The US-China Business Council (USCBC) is a private, nonpartisan, nonprofit organization of more than 200 American companies that do business with China. For over four decades, USCBC has provided unmatched information, advisory, advocacy, and program services to its membership. Through its offices in Washington, DC; Beijing; and Shanghai, USCBC is uniquely positioned to serve its members' interests in the United States and China.