Over the last year, China has become an increasingly hostile place to conduct business, especially for tech companies, manufacturers and other big industries, according to an annual survey of more than 470 U.S. and foreign companies released Wednesday by the American Chamber of Commerce in China.
The survey found rising concerns about protectionist policies in China and unfair targeting of foreign companies for monopolistic practices. In 2013, only 40 percent of companies surveyed said the government was “singling out” foreign companies for prosecution. In the latest survey, conducted in November, that figure had risen to 57 percent.
There’s still big money to be made in China. Overall, nearly three-fourths of those surveyed reported that their Chinese operations were profitable or very profitable, but revenues have leveled off and labor costs continue to rise.
Mark Duval, President of the American Chamber of Commerce in China, said it was clear that several “research-and-development” industries — a sector that includes high-tech, pharmaceuticals, clean technology and aerospace — had concerns about China’s trajectory.
“These R&D-intensive industries typically have to invest a lot of money,” said Duval, a former executive at Motorola China. “The bets they have to make in China are probably more expensive bets. And if they are not getting the licensing they need to sell their products … why would they continue to invest in China?”
The chamber has been polling its member companies in China for 17 years, but this is only the second survey released since Xi Jinping became the country’s president in March of 2013.
One of the most powerful Chinese leaders in decades, Xi has launched several major initiatives, including a restructuring of the economy and an effort to root out official corruption. At the same time, he’s tried to inoculate China from Western influences by arresting dissidents and more rigidly controlling what’s taught in schools and made available on the internet.
The chamber’s latest survey reflects those trends. Whereas official corruption was once a top-five concern of foreign companies, it’s fallen off the list the last two years. At the same time, 47 percent of businesses surveyed in 2014 agreed that “foreign businesses are less welcome in China than before,” an increase from the previous year. Some 43 percent said there’d been no change; 10 percent said China was more welcoming.
In addition, more than four of every five companies said China’s internet censorship — known here as “the Great Firewall” — hurt their business in varying degrees. According to chamber officials, much of this concern stems from slow data speeds caused by the government’s surveillance of web traffic.