Regulatory Barriers, Indigenous Innovation Policies Pose Threat to Companies in China

BEIJING, March 22, 2011 /PRNewswire-Asia/ -- US member companies are performing well in China and most plan to expand operations this year, but many are concerned about regulatory practices that favor domestic companies, according to the 13th annual Business Climate Survey conducted by the American Chamber of Commerce in the People's Republic of Commerce (AmCham-China).

The 2011 Business Climate Survey found AmCham-China member companies are highly committed to the China market, with 83 percent of survey respondents planning to increase investment in China operations this year. Macroeconomic worries dating from the financial crisis have receded, and the vast majority of respondents – 85 percent – reported revenue growth in China last year.

But survey respondents in China indicate that bureaucracy and unclear laws and regulations are impeding their investment and hiring plans. Of particular concern are burdensome licensing procedures and indigenous innovation policies that favor domestic companies at the expense of their foreign counterparts.

"Our members are committed to investing in China and growing with China, but as China enters its 10th year in the WTO, the goal of a fair and transparent regulatory environment has not yet been achieved," observed AmCham-China Chairman Ted Dean. "We believe greater market access, increased transparency, improved IPR protection, and a fairer playing field with national treatment will open new opportunities for our members and move China closer to its own goals of a more innovative economy and more balanced economic growth."

Highlights of the survey include the following:

• Sixty-one percent of all respondents to the Business Climate Survey are in China primarily to produce goods or services for the China market.
• In China, companies must obtain licenses to operate. Of the Business Climate Survey respondents who said obtaining a license is important for their business operations, 71 percent believe the licensing process effectively discriminates against foreign companies. These respondents indicated concerns with the transparency of the process, the length of time needed to secure a license, the availability of licenses, and the equal enforcement of rules pertaining to licensing.
• Of respondents who said securing a license is important for their business, 35 percent say licensing procedures have actually become more difficult than in the past. Nearly two thirds – 62 percent – of respondents who need a license for their business say onerous licensing requirements have the effect of slowing their expansion and investment. Another 22 percent of those who require licenses say the arduous licensing process forces delays in hiring.
• Forty percent of those surveyed believe China's indigenous innovation policies will hurt their business. And twenty-six percent of companies say they have already lost business because of indigenous innovation policies.
• Respondents who said they anticipated losing business because of indigenous innovation policies were most concerned about losing out on sales to state-owned enterprises (SOEs). Sixty-two percent of respondents cited SOEs as a market where they are likely to lose business as a result of indigenous innovation policies – a rise of 10 percentage points from the number of members who singled out SOEs as a concern last year.
• Two thirds of respondents said intellectual property rights (IPR) protection is very or critically important to their business. However, 70 percent rated China's enforcement of intellectual property rights as either ineffective or totally ineffective. The current IPR enforcement campaign is a constructive step in this direction.

The 2011 AmCham-China Business Climate Survey was conducted among AmCham-China members in late 2010. There were 434 company respondents to the survey.

About the American Chamber of Commerce in China:

AmCham-China is a non-partisan and independent non-profit organization representing the interests of some 2,600 companies and individuals doing business throughout China. Formally recognized by China's Ministry of Civil Affairs in 1991, AmCham-China is the leader at promoting American business interests in China. Headquartered in Beijing, with chapters in Central China (Wuhan) Tianjin and Dalian, the Chinese government recognizes AmCham-China as America's official chamber of commerce. For more information, visit: www.amchamchina.org