Obstacles face US companies in China

27 March 2012

BEIJING: Brand owners from the US are facing a wide variety of obstacles in China, ranging from securing top-level talent to coping with internet censorship, new research has revealed.

The American Chamber of Commerce in the People's Republic of China polled 390 firms, finding that 82% plan to boost local spending rates in 2012, while 78% put the country among their top three investment destinations for the near term.

An additional 76% of the sample expected revenues to expand in the Asian nation this year, whereas only 8% of organisations anticipated a sales decline and 16% thought figures should remain unchanged.

Elsewhere, 39% of enterprises predicted that operating margins in China would surpass the global average this year, alongside 29% forecasting little change to the existing situation and 32% arguing that a net contraction was likely.

When ranking current challenges, 43% of the panel cited human resources concerns surrounding management, typically in the form of hiring, training and retaining the right talent. Some 29% brought up similar matters for rank-and-file staff.

For 37% of contributors, an inconsistent regulatory climate and unclear laws were the primary issue, falling to 26% for both corruption and difficulties related to obtaining the necessary legal licenses.

Ted Dean, the chairman of AmCham China, said: "China's increasingly advanced economy requires a more open, transparent and market-oriented regulatory regime. Promoting greater government transparency and more vibrant market competition would benefit Chinese as well as foreign companies."

More broadly, 46% of executives agreed a Chinese economic slowdown was the main risk to their domestic activity, while 40% stated the global financial crisis could exert such an impact locally.

Surging labour costs were flagged up by 39% of interviewees, another 28% of which believed heightened protectionism might potentially become problematic.

Overall, 89% of participants suggested that rising costs meant China was losing its competitive advantage to either "some" or a "great" degree, a total which had grown by 11 percentage points on an annual basis.

Further issues in the world's most populous nation included the forced technology transfers sometimes demanded by the government to gain market access, raised by 33% of those surveyed.

Despite efforts by the Chinese authorities to crack down on intellectual property violations, 66% of firms agreed that the situation was unchanged or worse. Moreover, 40% of companies stated that censorship of the internet was impeding their activities.

Data sourced from American Chamber of Commerce in the People's Republic of China; additional content by Warc staff