American companies in China still face far more restrictions to operate compared to their counterparts in the US, hampering investments in the mainland. The American Chamber of Commerce in China (AmCham) observed in a recent report that industries in which the US companies in China have been disadvantaged include health care, movies and cloud computing.
“American firms face long standing structural challenges in the China market that conspire to tilt the playing field against foreign-invested enterprises and foreign investors,” the report said. “The US firms would consider increasing their investments in China if markets were open on a par with those in the US,” the report observed.
In China, ease of doing business especially in the advanced industries is currently under the scanner. China’s insistence that foreign businesses must work with a local partner, along with a plethora of local government restrictions, is raising fresh questions about the openness of the business environment in the country. This is brewing considerable resentment within the US business and government circles, especially as Chinese companies are allowed to operate with far fewer restrictions in the United States.
Despite all the pressure imposed by former US President Donald Trump, market access for US products and services continues to remain problematic. Trump had used tariffs and sanctions to address long-standing complaints about China’s business practices, including lack of intellectual property protections, by forcing companies to transfer cutting edge technology.
According to the report, American companies in the healthcare sector are especially targeted. For instance, investments in medical institutions in China cannot exceed 70 per cent. In comparison, no such cap exists in the US.
In the Cloud computing arena, foreign firms cannot invest more than 50 per cent in these businesses. There are no such restrictions in the US. In the movie business, the Chinese government sets film release dates and requires that 75 percent of revenue remains with Chinese film production companies. In the US, Chinese companies can freely distribute films and set their own release dates.
The AmCham report indicates that political tensions between the US and China has become the primary challenge for operating in the Communist regime. The political environment has made it even harder for central government policies supporting foreign business to be implemented at a city level, revealed Greg Gilligan, Chairman of AmCham.
“We feel that local officials are reacting to the level of tensions in the relationship, and just taking the safer path, which is to offer preference to domestic industry,” he said. Gilligan expects tensions between the two countries to persist for at least the next two years, due to domestic politics that require each leader to maintain a firm stance on the other country.
Since taking office in January, US President Joe Biden has kept Trump-era tariffs and sanctions in place, while seeking to work with traditional US allies in putting pressure on China. President Biden called for America to work together against competition from China, as tensions between the two nations simmered. Rather than engagement, taking a tough stance on China has become one point of agreement between Democrats and Republicans in an increasingly politically divided country.
Tensions between the US and China escalated under former President Donald Trump, who used tariffs and sanctions to try to address longstanding complaints about China’s unfair practices. These included requiring companies to transfer technology to do business locally. While Biden has sought to work more with traditional US allies in putting pressure on China, he has stuck to Trump’s firm position on Beijing, including retaining tariffs and sanctions.
Yet, as the world’s second-largest economy, China is a priority market for more than two-thirds of AmCham’s members, the report said. The business organisation said its surveys indicate nearly 85 per cent of members are not planning to move manufacturing or sourcing away from China in the near term.
