F REIGN TRADE - 中国国际贸易促进委员会

Regional Trade & InvestmentNORTH AMERICA2012By Lesley CuiState of AmericanBusiness in ChinaAmid rising costs and moderating economicgrowth, there is increasing urgency for Chinato enact market reforms in order to transitionto a more innovative and sustainableeconomic model, according to the 2012 State of AmericanBusiness in China White Paper released by theAmerican Chamber of Commerce in China (AmChamChina).The annual White Paper, now in its 14th edition,is written by representatives from over 1,200 membercompanies of AmCham China. It outlines key developmentsand challenges across a wide range of industriesin which US member companies operate in China, fromagriculture to financial services to retail. It also containssuggestions for both the US and Chinese governmenton how to improve the business climate.As China’s economy grows, market conditions remaingood for business, and AmCham China membersreport strong revenues and good profit margins. Am-Cham China members remain strongly committed tobusiness growth and participation in the China market.However, the 2012 White Paper identifies growinguncertainties over the future pace and directionof economic reform and the impact on operations inChina.China’s progress toward a market economy hasslowed in recent years and the outcome of ongoingefforts to rebalance the economy to create a marketbased on domestic demand and sustainable innovationremains uncertain. “AmCham China commends thegovernment for the many successes it has achieved, butthe transition to a new economic growth model presentsnew challenges. A new commitment to deepen marketreforms and extend a truly market economy to additionalsectors of the economy will ensure more sustainableeconomic growth in the future and create new opportunitiesfor companies and consumers,” said AmChamChina Chairman Ted Dean.As China enters a transition phase in its economicdevelopment, the 2012 White Paper outlines policy recommendationsthat will benefit China’s economy andadvance China’s development goals. “To position itselffor the coming decades of growth, we believe Chinashould promote more vibrant competition. It coulddo so by opening up market access across the manyindustries that remain restricted to foreign investors,completing the transition to a market economy, andpromoting greater consistency and transparency in governmentpolicies around the country,” said Ted Dean.Specific policy recommendations in the 2012White Paper for improving the business and investmentenvironment include a focus on human resource challenges,improving regulatory coherence across China, increasinglicensing opportunities for member companiesand improving intellectual property rights protection.Rising labor costsEighty nine percent of member companies believeChina is losing its competitive advantage due to risingcosts, up 11 percent from last year. 82 percent of respondentssaid the cost of social benefits would hurt theiroperations, compared to 53 percent a year ago.Management-level human resources are seen as theleading business challenge and nonmanagement-levelconstraints rank third, while other inputs such as thecost of land, rent, raw materials and transportation arealso rising. China is losing its competitiveness in laborcosts and that will eventually lead to a structural changein manufacturing and trade, but it is also a positiveoutcome of ongoing efforts to rebalance the economy,AmCham China said.Strong commitment of US companies to the Chinesemarket is subject to China’s future policy choicesand development path, as well as external risks such asanother global economic slowdown, according to TedDean, chairman for AmCham China.Stronger competition from ChineseenterprisesThe growing strength of Chinese companies -both State-owned and in the private sector - has beenhighlighted in the report. 68 percent of respondentssaid they had faced increased competition from Chinesefirms, with a third saying that this competition had“increased greatly”. The period measured was between2011 and 2010.60