American companies face significant challenges in their business operations with China due to trade tensions, but the market remains one of the most important to their bottom lines. These are among the findings of The US-China Business Council’s (USCBC) 2018 Member Survey, released today.
Regulatory issues present a significant challenge for foreign companies in China: issues such as those highlighted in the administration’s Section 301 report. At the same time, USCBC’s survey also highlights that the administration’s efforts to try to address those issues are affecting business in ways that are both expected and unexpected.
Three major themes dominate the US-China Business Council's 2018 member survey outcomes:
- US-China trade tensions are affecting American companies:
- 73 percent of companies report their business has been affected by current bilateral trade tensions.
- While companies report increased scrutiny from regulators in China and the US and loss of sales due to both US and Chinese tariffs, they also report lost sales due to uncertainty about supply chains, reliability of American companies amid these tensions, and overall uncertainty about how and when these issues will be resolved.
- Regulatory issues in China continue to be a significant challenge for foreign companies.
- Since 2009, when USCBC began asking about signs of protectionism in China, companies have regularly reported that they see favoritism for Chinese companies in China's licensing and regulatory processes. In 2018, almost 60 percent of respondents cite protectionism in licensing.
- US companies remain optimistic, but China's current policy and regulatory environment could affect American companies' five-year business outlook for China.
- Despite these challenges, China remains an important market for American companies.
- Most American companies invest in China to access and compete for Chinese customers, and China remains among the top priority markets for 90 percent of US companies. Most plan to maintain or accelerate their resource commitment to China in the coming year.
- While companies report that their China operations are profitable, China no longer consistently outperforms other markers and, if trade tensions continue, American companies may begin to shift to other markets that present fewer challenges.
Erin Ennis, Senior Vice President of USCBC said, “The issues in the bilateral relationship are difficult ones, but they are solvable. Solutions will require detailed negotiations to address the problems – but it will be worth the time and effort for both economies, and for both American and Chinese companies.”
USCBC President Craig Allen said, “We urge the Chinese government to implement a quick series of bold reforms that send a clear signal to its trading partners and members of the Party. It is time for China to simultaneously address the legitimate concerns of foreign companies – not in a minimalist way – but in a manner befitting a global leader.”