Licensing Challenges and Best Practices in China 2014

Executive Summary

• Licenses and approvals are essential to doing business in China, as in any other market, and present significant challenges for manufacturing and services providers operating there. For foreign companies invested in China, the process of expanding manufacturing operations remains particularly difficult. This report reviews companies’ experiences when expanding their operations in China.

• Members of the US-China Business Council (USCBC) have continually raised the issue of administrative licensing in USCBC’s annual membership survey. In USCBC’s 2013 survey, members ranked administrative licensing as their third most significant concern in the China market.

• Lack of transparency in the licensing process creates some of the most prevalent challenges in China’s licensing process, particularly in relation to documentation requirements, regulatory implementation, and procedural timelines.

• Requirements to disclose potentially sensitive company information in order to secure licenses—and the corresponding risk of intellectual property theft—are another notable concern. This concern was particularly strong for disclosure requirements during the course of expert panel reviews that take place at multiple stages in the licensing process.

• Throughout the licensing process, local governments frequently recommend domestic third-party firms to consult or manage different aspects of companies’ domestic licensing. Such recommendations often present compliance and approval challenges and can be difficult for companies to mitigate.

• To help manage the licensing process, interview respondents suggested that companies should establish strong relationships with local government officials involved in the licensing and approval process. Respondents also recommended that companies should make clear to officials at a project’s outset what information companies are—and are not —willing to disclose. To aid in this, companies may also consider creating internal decision-making structures to help manage requests for sensitive information when they arise. Other licensing best practices are detailed in the full report.