China a priority for most US enterprises

US enterprises doing business in China believe the country remains a key priority for most American companies despite challenges in the economy, trade and the impact of the coronavirus outbreak, according to the American Chamber of Commerce in China’s latest annual survey.

According to the report, released on Tuesday, 61 percent of the chamber's members described their financial performance as “profitable,” although China’s slowing GDP is reflected by the fact that 21 percent saw a drop in revenue in 2019, compared with 7 percent in 2017.

Subsequent to the annual survey, additional surveys on the influence of epidemic showed that the uncertain and developing nature of the COVID-19 epidemic is causing member companies to reassess their outlook and priorities for the year.

“The fight against COVID-19, ongoing bilateral negotiations, and a slowing Chinese economy make for challenging business conditions. Foreign businesses will have to be versatile and resilient, and keep long-term plans in mind,” said Greg Gilligan, chairman of AmCham China. 

“But the market panic of COVID-19 will eventually subside, and 2020 will be a critical year for businesses and policymakers with significant impact on the trajectory of US-China relations,” Gilligan said. 

“It is our hope that our survey’s results will spark open and candid dialogue between both countries as we continue to advocate for a fair and open business environment and new momentum to drive economic reform measures that will benefit American company investments here as well as the broader Chinese economy, ” Gilligan said.

In spite of financial setbacks and growing caution when it comes to investment, China remains a top priority for most member companies, according to the chamber.

A combination of concrete actions taken in 2019 coupled with reforms in the financial services sector have boosted confidence in the Chinese government’s commitment to further open its market to foreign investment, the annual report said.

In addition, a higher proportion of foreign businesses said they felt more welcome in China in 2019, despite ongoing turbulence in the bilateral relationship. Some 63 percent of members believe foreign companies in their industry are treated equally or preferentially in comparison with local companies. 

The survey also showed that 69 percent of members agree that China’s enforcement of intellectual property rights has improved in the past five years, an increase of 10 percentage points from 2018. 

Half of members said the investment environment in China had improved in 2019, compared with 38 percent in 2018. 

About 14 percent of respondents were optimistic about US-China relations in 2020, compared with 11 percent in 2018, while nearly a fifth of respondents had moved, or were considering moving, their capacity outside China, a proportion which has slowly decreased over the past three years.

However, despite efforts by the Chinese government in 2019 to open its markets, market access barriers remain in particular industries. More than half of the chamber's members said they would increase investment in China if markets were to open on a par with the US.

Members emphasize that the US government can be most supportive of American business in China by continuing to advocate for a level playing field, prioritizing a “results-oriented framework for regularized government-to-government communication” and reducing tariffs on goods exported from China. 

They also noted they would be most likely to increase investment in China if the Chinese government were to increase the transparency, predictability and fairness of the regulatory environment, ensure greater protection of intellectual property, and limit the use of industrial policies that tilt the playing field in favor of domestic companies, especially state-owned enterprises.

The annual survey was conducted in late 2019 and sent to 771 AmCham China member company representatives, of whom 372 completed the majority of questions.