The AmCham 2011 China Business Climate Survey

The 2011 China Business Climate Survey, released in March by the American Chamber of Commerce in China, portraits the opportunities – and the risks – associated with doing business in China.  Yet just as respondents noted a number of concerns, 83% said that they will increase investment in their China operations in 2011.  (Get the survey here.)

The survey of 434 multinational companies doing business in China found that business performance returned to pre-financial crisis levels in 2010.  85% of respondents reported increased revenue in 2010 – up from 58% of respondents in 2009.  And they are equally optimistic about 2011: 57% expect revenues in China to increase at least 11% this year.

Yet firms still report concerns about market access and industrial policies in China, among other issues.  “While the current environment is generally positive, the survey reveals concerns and warnings about the future. . . China’s regulatory landscape continues to hamper current and future opportunities for American companies. This puts long-term growth and, in some sectors, continued market participation, into question for the first time since China began its market reforms more than 30 years ago.” 

As the Financial Times reports, “It is not that China is not trying.”  Yet, according to survey respondents, at least, China’s not making a lot of progress.  “When asked to what extent recent economic reforms had improved the climate for US business in China, the number of respondents who selected ‘not at all’ increased by 15 percentage points. While this could reflect that reforms are no longer as essential as they were in the past, it could also demonstrate a sentiment that progress on economic reform has stalled.”

2011 China Business Climate Survey Highlights

China opportunities

  • 78% percent of companies surveyed rank China among their top three priority locations for investment.  Only 7% rank China as “not a high priority.”
  • When asked, “What are your company’s primary goals and strategies in China?” respondents said:
    • Produce or source goods or services in China for the China market ­­– 61%
    • Produce or source goods or services in China for the US market – 10%
    • Import into China – 8%
    • Produce or source goods or services in China for other (non-US/non-China) markets – 8%
    • Other – 13%

China risks

  • When asked, “What do you think are the greatest risks facing your China organization?” respondents said:
    • Chinese economic slowdown
    • Global economic slowdown
    • Increased Chinese protectionism
    • Labor costs
    • Deterioration of Sino-US relations
    • RMB appreciation
    • Increased bureaucracy
  •  “Compared to last year, the percentage of respondents who named bureaucracy and Sino-US political tensions as a serious risk increased by at least five percentage points.”
  • The issues respondents reported as “top business challenges” included:
    • Bureaucracy
    • Management-level human resources constraints
    • Unclear laws and regulations
    • Inconsistent regulatory interpretation
    • Intellectual property rights infringement
    • Corruption
    • Obtaining required licenses
    • Non-management level human resources constraints
    • National protectionism
    • Local protectionism
    • Difficulty enforcing contract terms

Indigenous innovation and IPR in China

  • When asked, “Do you feel that your company is losing out on business in China as a result of indigenous innovation?” respondents said
    • Yes – 26%
    • No – 68%
    • 6% reported benefiting from indigenous innovation policies
  • When asked, “How important is the protection of intellectual property rights to your business?” respondents said:
    • Critically important – 19%
    • Very important – 47%
    • Slightly important – 21%
    • Not important – 13%
  • When asked to rate China’s enforcement of IPR, respondents said:
    • Totally ineffective – 15% (up from 11% in 2009)
    • Ineffective – 55% (down from 63% in 2009)
    • Effective or very effective – 30% (up from 26% in 2009)

Human resources in China

  • “Consistent with last year, increasing salary and wage expenses remain the number-one human resource issue for foreign business in China. This may reflect both the maturation of China’s work force as workers accumulate more advanced technical and managerial skills and the effects of ongoing wage inflation.”

Securing licenses in China

  • 60% of respondents said that securing licenses is very or critically important to their business.  Yet 71% stated that licenses are not equally granted to foreign and Chinese companies.  And 49% of survey respondents said that there has still been no change in the licensing process (35 % report that licensing procedures have become more onerous than in previous years). 
  • “Given that 43% of respondents say licensing requirements put them at a competitive disadvantage, one can deduce that US companies feel they are losing business to local competitors who have an easier time obtaining licenses than they do.”

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