Chinese and American flags outside the building of an American company in Beijing, China January 21, 2021.
Tingshu Wang | Reuterss
BEIJING – Many US companies in China are still finding it harder to operate in the country compared to their Chinese counterparts in the US, the American Chamber of Commerce in China said in a report released Tuesday.
“The members of AmCham China are facing long-standing structural challenges in the Chinese market, which are leading to an improvement in the playing field against (foreign-invested companies) and foreign investors,” the report said.
“Two-thirds of members say they would consider increasing their investment in China if markets were open at US levels, a slight increase over last year,” the authors wrote.
Foreign companies in China often need to work with a local partner and face many restrictions on local investment, while Chinese companies in the US can operate with far fewer restrictions.
Market access challenges remain despite increasing pressure on Beijing under the administration of former President Donald Trump.
Trump used tariffs and sanctions to handle long-standing complaints about China’s business practices – including lack of intellectual property protection and corporate obligations to transfer technology.
Below are some of the industries in which American companies are at a disadvantage in China, according to the report:
- Health services – Foreign investment in medical facilities in China cannot exceed 70%. In comparison, there is no such upper limit in the US
- Cloud computing – Foreign companies cannot invest more than 50% in cloud service companies. There are no such restrictions in the United States
- Movies – The Chinese government sets the release dates for films and requires that 75% of sales remain with Chinese film production companies. In the US, Chinese companies can distribute films without restrictions and set their own release dates.
IP an area of improvement
The central Chinese government has taken steps in recent years to improve the operating environment for overseas companies. A new foreign investment law went into effect last year while Beijing lifted property restrictions in the financial and other industries.
We believe that local officials are reacting to the tension in the relationship and are only going the safer route, which is to give preference to domestic industry.
Chairman of the American Chamber of Commerce in China
“Chinese courts have improved their intellectual property disputes,” AmCham Policy Committee leader Lester Ross told reporters on Tuesday. Citing his point of view as a lawyer, he said that “China’s courts have become a little fairer”.
AmCham also found that last year 47% of its members said they had improved overall intellectual property enforcement.
Political tensions make business difficult
However, the political tensions between the US and China have become the biggest challenge for AmCham members working in the Asian country, the report said.
Speaking to reporters on Tuesday, Chairman Greg Gilligan said the political environment had made it even more difficult to implement the central government’s overseas business policy at the city level.
“We feel that local officials are reacting to the tension in the relationship and are just taking the safer route, which is to give preference to domestic industry,” he said.
Gilligan expects tensions between the two countries to persist for at least the next two years as domestic politics require each leader to take a firm stance toward the other country.
Since taking office in January, U.S. President Joe Biden has maintained Trump-era tariffs and sanctions and sought to work with traditional U.S. allies to put pressure on China.
As the world’s second largest economy, China is a “priority market” for more than two-thirds of AmCham members, the report said. The corporate organization said that according to surveys, almost 85% of members do not plan to move production or sourcing away from China for a short period of time.