Asia Briefing: Corporate US still optimistic on China

"Tempered optimism" is how corporate America now views the Chinese business environment. This is the message of the annual survey by the US-China Business Council (USCBC), as slowing economic growth, rising costs and persistent, unaddressed operating challenges in China continue to weigh on sentiment.

On the positive side, more than 90 per cent of survey respondents reported that their China operations were profitable, the highest percentage reported since the USCBC began surveying its membership.

The council has 219 members, including big names like Apple, Coca-Cola and Caterpillar. Of the 110 respondents in the survey, 60 per cent were manufacturers and 40 per cent were services companies.

Of the respondents, 96 per cent said that China was still among their top five global investment priorities, although the number that said it was their top priority declined from 22 per cent a year earlier to 15 per cent now.

The survey's findings tally with those of the EU Chamber of Commerce's annual report a while ago, which showed that people felt they needed to be in China and could still make money here, despite an increasingly difficult operating environment. Just over half of survey respondents plan to commit more resources to China in the next year, down from 67 per cent in the 2012 survey.

Rising costs
The number one challenge is rising costs, especially the cost of labour which has risen from last year, when it was just fourth in the list of concerns. Problems with licensing occur at the central, provincial, and local levels and affect almost every aspect of doing business in China.

Licensing issues often overlap with other issues in the top 10, including uneven regulatory implementation. Also problematic are the lack of national treatment and insufficient transparency in government rule drafting and decision making.

Similarly to the EU chamber survey, respondents expressed concern about the benefits given to Chinese firms, both State-owned enterprises and private companies, that are denied to most foreign companies.

Competition is also intensifying. Most multinational companies in China contend with other foreign competitors as well as both state-owned and private Chinese companies.

Also, this year’s survey mentioned emerging challenges such as cybersecurity that affect a wide variety of companies. Progress on this issue will require government-to- government discussions and action, the survey said.