U.S. firms still face more restrictions in China than Chinese firms face in U.S., says business group

Chinese and U.S. flags outside the building of an American company in Beijing, China January 21, 2021.

Tingshu Wang | Reuterss

BEIJING — Many U.S. companies in China are still finding it harder to operate in the country compared with their Chinese counterparts in the U.S., the American Chamber of Commerce in China said in a report released Tuesday.

“AmCham China’s members face longstanding structural challenges in the China market that conspire to tilt the playing field against (foreign-invested enterprises) and foreign investors,” the report said.

“Two-thirds of members say they would consider increasing their investments in China if markets were open on a par with those in the US, a slight increase on last year,” the authors wrote.

Foreign businesses in China must often work with a local partner and face many limits on local investment, while Chinese companies can operate in the U.S. with far fewer restrictions.

The market access challenges remain despite increased pressure on Beijing under former President Donald Trump’s administration.

Trump used tariffs and sanctions to address long-standing complaints about China’s business practices — including lack of intellectual property protection and requiring companies to transfer technology.

The following are some industries in which American companies operate at a disadvantage in China, according to the report:

  • Health care services — Foreign investment in medical institutions in China cannot exceed 70%. In comparison, no such cap exists in the U.S.
  • Cloud computing — Foreign firms cannot invest more than 50% in cloud services businesses. There are no such restrictions in the U.S.
  • Movies — The Chinese government sets film release dates and requires that 75% of revenue remains with Chinese film production companies. In the U.S., Chinese companies can distribute films without restrictions and set their own release dates.

IP an area of improvement

The central Chinese government has taken steps in the last few years to improve the operating environment for foreign businesses. A new foreign investment law took effect last year, while Beijing has peeled back ownership restrictions in finance and other industries.

We feel that local officials are reacting to the level of tensions in the relationship, and just taking the safer path, which is to offer preference to domestic industry.

Greg Gilligan

Chairman, American Chamber of Commerce in China

“Chinese courts have improved in terms of disputes in intellectual property rights,” AmCham Policy Committee Head Lester Ross told reporters in a call Tuesday. Citing his perspective as a lawyer, he said that “China’s courts have become somewhat fairer.”

AmCham also found that over the past year, 47% of its members said enforcement of intellectual property rights has improved overall.

Political tensions make business harder

However, political tensions between the U.S. and China have become the primary challenge for AmCham members operating in the Asian country, the report said.

On the call with reporters Tuesday, Chairman Greg Gilligan said the political environment has made it even harder for central government policies supporting foreign business to be implemented at a city level.

“We feel that local officials are reacting to the level of tensions in the relationship, and just taking the safer path, which is to offer 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 politics that require each leader to maintain a firm stance on the other country.

Since taking office in January, U.S. President Joe Biden has kept Trump-era tariffs and sanctions in place, while seeking to work with traditional U.S. allies in putting pressure on China.

As the world’s second-largest economy, China is a “priority market” for more than two-thirds of AmCham’s members, the report said. The business organization said its surveys indicate nearly 85% of members are not planning to move manufacturing or sourcing away from China in the near term.

Source: CNBC