U.S. Firms Worry About Future In China

U.S. companies plan to expand their operations but remain concerned over regulations that favor local companies at the expense of foreign businesses.

BEIJING (AP) -- American companies plan to expand their operations in China but remain deeply concerned over regulations that favor local companies at the possible expense of foreign businesses, a U.S. group said Tuesday.

An annual survey released by the American Chamber of Commerce in China showed that U.S. companies performed well in the past year, returning to pre-financial crisis levels of profitability. The vast majority -- 83 percent of respondents -- plan to increase their investment and expand operations in China.

At the same time, the report said businesses expressed major concerns with bureaucracy and regulatory uncertainties in China that favor domestic companies, and voiced increased pessimism that economic reforms can improve the working climate.

"One part of the story is that American companies are doing well and profitability is back to where it was before the financial crisis. But the second part is that companies have some real concerns about some elements of the regulatory environment," said the group's chairman, Ted Dean.

In particular, U.S. companies reported that regulatory barriers, including licensing difficulties and innovation policies that favored Chinese companies over foreign counterparts, were problematic to their future growth.

Nearly three quarters of respondents -- 71 percent -- complained that the licensing process effectively discriminates against foreign companies. Forty percent of those surveyed said they believe the indigenous innovation policies will hurt their business, while another 26 percent say it has already hurt business.

Beijing's indigenous innovation policy was introduced to nurture domestic technology companies by favoring them in official procurement. Business groups complain that could shut foreign suppliers out of fast-growing markets for computers and other goods.

The difficulties are especially troubling given that a majority of U.S. companies are here to reach the Chinese market, Dean told reporters.

"A very large share of our members are in China for China. They are primarily here to sell to the China market. As China shifts to a domestic demand-led economic model, companies are investing in building their businesses to serve that group," he said

Unlike in previous years, fears that a China economic slowdown was imminent have largely receded, with 85 percent of companies reporting revenue growth in China last year.

The survey, conducted last November and December, had responses from 434 member companies, representing industries ranging from services to manufacturing and high-tech.

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