Pollution, unclear regulations major hurdles for US firms in China

Chronic air pollution and unclear regulations are the major obstacles for most of the United States-based companies operating in China, a survey said on Wednesday.

Of the 477 companies that participated in the annual business climate survey conducted by the American Chamber of Commerce in China, 53 percent said that they experienced difficulties in hiring senior executives to work in China because of the country’s chronic air pollution.

This is the first time that air pollution has been cited as a reason by most of the companies that have participated in the survey’s 17-year history.

This year’s report, conducted in partnership with Bain & Co, also said that 65 percent of the companies considered non-transparent, unclear and inconsistent regulations as the greatest barrier for their ability and willingness to invest in China.

James Zimmerman, chairman of AmCham China, said: “Member companies are committed to the market, but continue to weather a challenging business environment as China continues on a path of economic reform and sustainable development.”

Regulatory concerns were highlighted as inconsistent and unclear regulations were found to be the second-biggest business challenge, after labor costs. About 57 percent of the respondents felt foreign firms were being targeted in investigations over pricing, anti-monopoly and anti-corruption probes by regulatory authorities.

“Our companies appreciate the complexities and difficulties that the Chinese leadership is confronted with as it balances its economy and implements its reforms,” said Zimmerman. “Nevertheless, much work lies ahead for all of us this year and beyond as the Chinese economy continues to mature.”

The more challenging business environment faced by US companies has resulted in the highest number since the 2009 recession, 31 per cent, having no investment expansion plans in China for the coming year.

Stephen Shih, a partner at Bain and co-author of the survey, said: “Business in China is at a turning point, and companies with interests here will have to decide whether to continue pursuing growth and investment in China, or whether to prioritize other growth opportunities.”

However, progress in the economic restructuring to “the new normal” of slower, more sustainable growth driven by consumption is being seen favorably by US companies. Growth in domestic consumption was cited as a key opportunity for business by almost half of the companies.

The services sector was the most optimistic concerning investment environment, difficulty in approvals and how welcome foreign firms were in China.

A lot of hopes hang on the bilateral investment treaty, in discussion since 2008, that is expected to deepen economic ties between China and the US.

“The BIT represents a major opportunity to improve the regulatory environment, which can enhance the ability of US companies to invest and innovate and compete in China for the benefit of the country’s economy,” said Zimmerman.

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