U.S. companies in China face one of the most challenging environments in decades this year, the American Chamber of Commerce in China said.
Political and economic transitions in the U.S. and China, increasing perception of animosity toward foreign businesses, and slowing growth are dimming the outlook, AmCham said in a report Tuesday. Despite recent rhetoric regarding opening and globalization, investment barriers remain high, it said in its annual American Business in China White Paper.
“The pace of economic reforms and market opening has been slow and faltering,” AmCham said. While administration, regulatory transparency and intellectual property protection have improved, policies designed to support domestic industries and national champions have narrowed the space for participation by foreign companies, it said.
The warning is the latest by the Beijing-based non-profit group, which said in January that more U.S. companies are slowing investment. About 81% of its members reported feeling less welcome in 2016 than previously, up from 77% in 2015.
Uncertainty Increases
“We are experiencing a clear increase in uncertainty as the U.S.-China relationship enters a new era,” AmCham Chairman William Zarit wrote in his introduction to the report. "The Trump administration is still finding its feet, and China itself will be undergoing a political transition this year. Multinational companies spanning this relationship, both American and Chinese, are paying close attention to developments as they make their plans."
More transparency would aid the government’s anti-corruption fight and give private companies more confidence that their investments will be fairly protected under the law, Zarit said. The stability and predictability provided by an unambiguous regulatory environment will be important for China’s continued growth, he said.
At a briefing on Tuesday, Lester Ross, chairman of the lobbying group’s policy committee, said the Chinese government recognizes that current policies are not sufficient to welcome foreign investment, and that policy makers are seeking ways to open their markets further.
He saw it as a positive sign that the two sides agreed to work together for 100 days, during which he said China may make some concessions on issues that have been pending for a long time to show progress and build rapport. The real question is whether the 100-day plan will provide momentum to address more complicated issues, Ross said.
Zarit also said it would be a shame if Donald Trump’s administration stopped short of pressing Beijing to open more markets to U.S. businesses and level the playing field in exchange for China’s objectives.
Trump told the Wall Street Journal last week he had offered President Xi Jinping more favorable trade terms if China helped to resolve the threat from North Korea.
By Bloomberg News
