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Because Twitter is an echo chamber of negativity, particularly about China, and seemingly rewards those with the loudest voice, I thought I’d lend some perspective from the US business community about the business environment in China.
I attended an event today in DC featuring the @AmChamSh. Here are some notes from the event, which was on the record.
US companies are not leaving China. They are in China, for China, and many are increasing their investments to access new markets/regions/consumers. Most still believe in the “China story” of a prolonged period of growth, increasing urbanization, and an expanding middle class
Concerns about US-China trade tensions are real. An increasing number of US companies are starting to lose sales opportunities to European & Japanese competitors because tariffs are putting US companies at a price disadvantage
Over the medium term (3-5 years), a majority of companies are most concerned about an economic slowdown in China, while prolonged trade tensions are their second greatest concern
The real story for US companies is about how competitive Chinese companies have become. They are faster to market than their Western counterparts and integrate technologies (particularly mobile) into their business models in ways that US companies still can’t match
On the positive side, US companies are seeing a material decrease in forced tech transfers, which has been a top concern for years and now a focal point of US-China negotiations
Asset management is a fast-growing space due to a recent relaxation of rules governing ownership structure. Previously, foreign firms had to operate under a joint venture with a Chinese partner. Now they can go it alone, and US companies are moving in
Similarly, healthcare (pharma, medical devices, and services) is a promising sector for US companies. Pharma, in particular, is growing very quickly due to recent relaxation of regulations and 79% of pharma companies expect revenues to grow in 2019
In general, provincial/municipal governments are very eager to attract US companies, which provides opportunities to benchmark and find the best deals on land, tax incentives, other benefits
Risks: US companies are reporting discrimination from national-level regulators in terms of receiving licenses and approvals. One AmCham rep noted her European & Japanese competitors have received gov’t approvals more quickly than her company
Risk: A growing number of US companies are concerned about possibility of rising anti-US sentiment and consumer boycotts—or worse—if a trade deal isn’t reached. Interestingly, PRC gov’t is actually attempting to quell nationalist sentiment by moderating online discussions
77% of @AmChamSh member companies were profitable in China in 2018; 71% reported y-o-y revenue growth, but 27% expect revenue to decrease in 2019
18% of companies will increase investment in China this year by over 16%; 29% will increase investment by 1-15%
26% will re-direct at least some investment out of China this year, mostly to guard their supply chains from tariffs
49% reported corruption/commercial bribery as a top operating concern, down from 69% last year
