China Business Environment 2011-2012

I have received an email from a subscriber who attended AmCham Shanghai presentation of its 2011-2012 China Business Report (315 US-based companies with operations in China surveyed). I share bellow what he felt were the main conclusions from the presentation but first I would like to thank him for taking the time to share this information:


1 China is a highly profitable market for those with a long term investment in it. 

I thought the profitability number (78 percent vs 79 percent last year) was rather high, but then looked at the length of time the survey respondents had had a physical presence in China – 80 percent of the companies surveyed have been in China for more than five years, 10 percent have over 20 years’ experience and only two percent of respondents have been in China for less than two years.


2 China is a maturing market.

Legal and regulatory challenges (those which are usually unique to China, in one way or another) are a constant. So progress on this is not being made (bad). But, the challenges US companies are more worried about now are “normal” business challenges – rising costs, scarce talent, growing local competition coming from the private sector.

China has become an essential market for multinationals, going beyond a mere supportive role for companies’ worldwide operations. In 2011, 66 percent of the companies report their revenue growth in China exceeded that of their operations worldwide.


3 In China for China

US companies are meeting these challenges by localising their China operations, and are increasingly focused on the domestic market – “in China for China”.

Some key figures to back this statement:

  • 58 percent of the companies produce goods or services for China as their primary strategy
  • 71 percent of companies sell and support products and services uniquely designed for the China market
  • 90 percent have expanded their operational footprints in China to include sales offices and research and development centers (R&D), in multiple locations outside Shanghai
  • 80 percent report “high” or “moderate” priority for staff localization
  • 61 percent report “high” or “moderate” priority for manufacturing localization


4 US companies in China are driving US exports

  • 62 percent of the companies report they import parts or finished goods from the U.S. into China
  • U.S. exports make up 32 percent of their China sales by value.


5 Short term optimism for China

Confidence is still relatively high. There is no evidence, from the survey outcomes, that US companies feel exposed to risks that have been talked about lately like those related to the housing market, the financial sector or to China’s reliance on exports to Europe.

What are your views?

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Top Legal / Regulatory Challenges in China

As I mentioned in one of my previous posts, AmCham Shanghai has released its 2011-2012 China Business Report, a detailed and comprehensive report that covers major issues companies face in China. Today I will focus on legal/regulatory challenges, as perceived by AmCham survey respondents (315 US-based companies with operations in China).

The report reminds us that China is not an easy place for business, and one of the reasons is the fact that the country’s legal framework is still in the process of being built. Even if the law is fully developed, the application and enforcement can be uneven, especially in areas outside Tier 1 cities (Shanghai, Beijing and Guangzhou). Bellow you may find the key legal/regulatory challenges identified ( % indicates that a challenge “seriously hinders” or “somehow hinders” business).

Key legal/regulatory challenges in China

1.Bureaucracy (74%)

2.Unclear regulatory environment (72%)

3.Lack of government transparency (67%)

4.Tax administration (66%)

5.Customs clearance delays (62%)

6.Customs and trade regulations (61%)

7.Difficulty enforcing contract terms (61%)

8.Obtaining required licenses (58%)

9.Difficulty in litigation (50%)

10.Domestic protectionism (between provinces) (49%)

11.Legal restrictions on market access (49%)

The list is topped by the same challenges we have seen in last year´s reports: bureaucracy, an unclear regulatory environment and a lack of government transparency. It is important to highlight that 71 percent of respondents say the regulatory environment in their industry has either “not changed” or “deteriorated” over the past year.

Responses to legal/regulatory challenges vary by industry but the less affected one seems to be the auto industries. As a well established industry in China( and a welcomed one) it does not so much perceive regulatory challenges as a major issue (it scores lower than any other on the question about challenges seriously hindering their business).

 Are these also your regulatory challenges?

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