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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Top Business Challenges for Foreign Companies in China (2011-2012)

AmCham Shanghai has released its 2011-2012 China Business Report. The report insights are based on a survey conducted amongst some of its corporate members ( 315 US-based companies with operations in China participated in it).
I will share some of their key findings in the next few posts. Today I will focus on business challenges and highlight some news.

Key Business Challenges in China (%) (*)

  1. Rising Costs   (91%)

  2. Human Resource Constraints    (90%)

  3. Increasing Competition    (83%)

  4. Lack of Market Maturity    (73%)

  5. Corruption/Fraud   (61%)

  6. IP Infringements      (54%)

  7. Unfair procurement practices   (54%)

  8. Preference for Domestic Companies   (53%)

  9. Labour Unrest (e.g., from restructuring)  (37%)

  10. Lack of Infrastructures    (36%)

  11. Business Disputes    (27%)

 (*) % that answered that a challenge “seriously hinders” or “somehow hinders” their business

 It is difficult to compare these results to last year´s results because this time the challenges have been divided into regulatory/legal and business challenges while last year they were presented in a common list. Still there is something that clearly stands out: “Rising Costs”. Not mentioned last year in the top 10 challenges it makes now a strong appearance at the top of the list.

 Some of the biggest challenges presented last year (bureaucracy, unclear regulatory environment, lack of transparency) are still perceived as important issues and top the list of regulatory/legal challenges.

Coming soon, more on China challenges.

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Top Business Challenges for Foreign Companies in China

AmCham Shanghai has just released their 2010-2011 China Business Report survey. These are the top business challenges as perceived by US companies doing business in China (322 sample size):
1. Human Resources Constraints
2. Inconsistent Regulatory Interpretation
3. Unclear Regulations
4. Bureaucracy
5. Lack of Transparency
6. Intellectual Property Rights Infringement
7. Tax Administration
8. Domestic Protectionism
9. Difficulty Enforcing Contract Terms
10. Corruption

The companies interviewed belong to a wide range of sectors and have different sizes…. I was wondering, from the perspective of  entrepreneurs and SMEs, are these also your challenges? Which are your top ones?

US Companies Feel Positive about China

Today I attended a lunch organized by AmCham Shanghai to present their 2010-2011 China Business Report. It was a really interesting presentation and the survey brings, as in previous occasions, good insights on how US companies are performing and how they see their future ahead in China (I would imagine we could extrapolate a lot of those insights to other countries’ realities)

These are a few highlights of the survey results: (more to come)
-companies are not just doing well… they seem to be doing great “reporting all-time performance highs”
– 87% of the companies reported “revenue growth” (Vs.  47% in 2009)
– 79% reported being “very profitable” or “profitable” (Vs. 65 % in 2009)
– 61% reported market share gains (Vs. 40% in 2009)

And they feel the future ahead is equally bright- with 71% of the companies expecting increase revenue growths by more than 10% in 2011.

Having said that, China is still a challenging market, with a wide range of issues like HHRR constraints, lack of transparency, protectionism, IP risks… just to mention a few. But today I will finish the post on a positive note and will write about some of those challenges in future posts.