Unequal access for U.S. businesses
Chinese and American flags outside an American company building in Beijing, China on January 21, 2021.
Tingshu Wang | Reuterss
BEIJING – Many American companies in China find it even more difficult to operate in the country than their Chinese counterparts in the United States, the American Chamber of Commerce in China said in a report released Tuesday.
“Members of AmCham China face long-standing structural challenges in the Chinese market that conspire to tip the scales against (foreign-invested enterprises) and foreign investors,” the report said.
“Two-thirds of members say they would consider increasing their investment in China if markets were opened on a par with those in the United States, a slight increase from last year,” wrote the authors.
Foreign companies in China often have to work with a local partner and face many limits on local investments, while Chinese companies can operate in the United States with far fewer restrictions.
Market access issues remain despite increased pressure on Beijing under the administration of former President Donald Trump.
Trump has used tariffs and sanctions to deal with long-standing complaints about China’s business practices – including the lack of intellectual property protection and the requirement for companies to transfer technology.
Here are some industries in which U.S. companies operate at a disadvantage in China, according to the report:
- Health services – Foreign investments in medical establishments in China cannot exceed 70%. In comparison, such a ceiling does not exist in the United States.
- cloud computing – Foreign companies cannot invest more than 50% in cloud service companies. There are no such restrictions in the United States
- Movies – The Chinese government sets film release dates and demands that 75% of revenues go to Chinese film production companies. In the United States, Chinese companies can distribute films without restrictions and set their own release dates.
China’s central government has taken steps in recent years to improve the operating environment for foreign companies. A new foreign investment law went into effect last year, while Beijing lifted ownership restrictions in finance and other industries.
“Chinese courts have improved in terms of intellectual property rights litigation,” AmCham political committee chief Lester Ross told reporters on Tuesday. Quoting his point of view as a lawyer, he said that “Chinese courts have become a little more fair.”
AmCham also found that over the past year, 47% of its members said that IP enforcement has improved overall.
However, political tensions between the United States and China have become the main challenge for AmCham members operating in the Asian country, according to the report.
During the call with reporters on Tuesday, President Greg Gilligan said the political environment has made it even more difficult to implement central government policies supporting foreign businesses at the city level.
“We believe that local officials react to the level of tensions in the relationship and simply take the safest route, which is to give preference to domestic industry,” he said.
Gilligan expects tensions between the two countries to persist for at least the next two years, due to domestic policy which force each leader to maintain a firm position on the other country.
Since taking office in January, the US president Joe biden kept Trump-era tariffs and sanctions in place, while seeking to work with traditional U.S. allies to pressure China.
As the world’s second-largest economy, China is a “priority market” for more than two-thirds of AmCham members, according to the report. The trade organization said its surveys indicate that nearly 85% of members do not plan to move manufacturing or sourcing out of China in the short term.