People consult about enterprise registration application at the service lobby of the Shanghai free trade zone (FTZ) on Oct. 25, 2013. Photo: Xinhua
China may not be the No.1 investment priority for American businesses any more, suggested a recently issued survey by a non-profit organization which represents US companies and individuals doing business in China.
“The business environment here has been different compared with five years ago. Most of our clients are multinationals. They are not doing so well and we are also affected,” said Steven Robinson, a partner of an international law firm.
Robinson's law firm joined the American Chamber of Commerce in China (AmCham China) several years ago, and now the guild-like organization has over 3,500 individual members from over 1,000 companies. Leafing through its thick membership directory, it's not difficult to find out that almost all big international brand names now operating in China are its members.
The AmCham China has been based in Chinese mainland for over three decades and it is known by member companies to be a good place to go for information and networking. Besides that, the organization also gains visibility through two of its annual publications—China Business Climate Survey and American Business in China White Paper.
Every April, the AmCham China would publishes its survey of the previous year and then within a few weeks, a White Paper that tends to give recommendations on solving problems and challenges put forward in the survey. A total of 365 member companies joined in the survey of China's business climate in 2014.
About the results of the 2014 survey, although Greg Gilligan, the Chairman of AmCham also emphasized in his summary that three quarters of the interviewed members are still optimistic about the next two years, the conclusion more valuable for foreign investors is that even if there is no cliff here, China has fallen from its top position as destination for American investors. Graham Norris, the communications director of AmCham, told sino-us.com that this is the key message that the survey would like to draw attention to.
China no longer the top choice?
In AmCham's 2007 business climate survey, over half of those interviewed thought China to be their No.1 choice for expansion, while in 2014, companies holding such a view dropped to 20% of the total.
“The trend began to show last year, and this year, it just became more obvious,” said Norris. According to the survey, 82% of those surveyed feel that China is losing competitive advantages due to rising costs. And Norris said lingering problems like unclear laws and regulations, disappointment over IPR enforcement, SOE favoritism, and things like these all make foreign businesses feel unwelcome compared with years before.
Chinese state media has remained notably silent on the findings, while the survey results have been frequently quoted by foreign media.
In fact, when last year's survey was issued, a top official from the Ministry of Commerce reacted strongly toward the key finding which claimed China's investment environment had failed to improve. The commercial official in charge of American affairs argued that a survey of several hundred American companies could hardly be comprehensive as there are over 20,000 American businesses now operating in China.
Amid a generally acknowledged economic slowing down in China, it is still not hard to find successful performers.
According to a Reuters report, although China's economy has slowed down, the second largest economy in the world still helped to push American economy up over the past quarter. The operations of multinationals like Coca Cola, General Motors, UTX, and McDonald's in China all reported strong performance in the first quarter of 2014.
William Baker, the partner of Mahon China, an international consulting company, told sino-us.com that until now, it's still hard to assess China's investment environment generally, although one thing is for sure, such kind of conjectures should be more specific about different industries and areas in China. For some industries in one area, expansion may not be a good idea while for some other industries in another area of China, high yields may be generated.
In a panel discussion meeting held by AmCham on the survey results, one company representative seems to have told a more true story, “China is already in the middle of transforming its economic model from relying on imports and investments to domestic consumption, and also from labor-intensive to more innovative industries. For a maturing economy, if investors would like to do what they did 10 years ago—producing cheap products of low added value, then they must be in the wrong place to do it."