China's blueprint for economic reform, presented in announcements over the past year, constitute a critical opportunity for the country to transform from the current strained economic model to a robust, dynamic, and sustainable one, the American Chamber of Commerce in the People's Republic of China (AmCham China) said.
However, in opinions derived from its new 2014 American Business in China White Paper, AmCham China also emphasised that executing reform would be challenging, and many uncertainties remain over how obstacles to doing business in China can be overcome.
"Just as the Chinese leadership has acknowledged the challenges of implementing these economic reforms, the short-term will prove difficult for some foreign businesses operating in China," said AmCham China Chairman Gregory Gilligan. "However, we are confident that these trials will yield a more positive economic environment in the future, both in terms of a more balanced Chinese economy and a fairer and more market-driven playing field for foreign companies operating in China."
The 16th edition of the White Paper, which is written by AmCham China members, advocates the key policy priorities of investment, intellectual property rights, transparency, and standards. It expresses not only many of the difficulties member companies face, but also details the progress made in various sectors, in addition to practical solutions for addressing areas where inconsistencies, inefficiencies, and unfair practices persist.
AmCham China member companies are encouraged by the government's ambitious reform agenda and developments such as the Shanghai Free-Trade Zone, the Third Plenum Decision, and renewed discussion of a bilateral investment treaty between the United States and China. However, although the direction is clear, the real work lies ahead - particularly in areas where foreign businesses face longstanding difficulties, namely market access, intellectual property rights, standards, and transparency.
China is the world's second-biggest economy, yet it maintains a more restrictive foreign investment regime than its major trading partners and requires approval of individual investments, while other countries require simple registrations or notifications. Especially as Chinese companies increasingly invest and operate in the U.S. and other countries, it is becoming ever more vital for reciprocal, transparent, and international-standard investment policies to be applied in China.
While there have been some improvements in the enforcement of IPR in China, members continue to show misgivings about the protection of their intellectual property, which can be extracted through technology transfers or simply stolen. Strong, reliable IPR enforcement is necessary for innovation to flourish. Protection of IPR further encourages entrepreneurialism, supports private sector development, and promotes growth of high-tech ecosystems and high-paying jobs for educated workers.
Lack of transparency hinders industry understanding of and compliance with laws and regulations. Indeed, inconsistent regulatory interpretation and their irregular enforcement and unclear laws remain as top challenges for our members. Additionally, foreign companies can help to share regulatory best practices if they are given sufficient time and opportunity to comment on proposed new rules.
AmCham China also recognises that standards development organisations (SDOs) play a key role in integrating the global economy. SDOs work best when they focus on technical quality and market relevance, regardless of the SDO's nature or country of origin. The Chinese government should advocate technical excellence which, in turn, will spur Chinese products to competitive global leadership.
"Despite these challenges, AmCham China remains highly invested in the positive outcomes of the reform and firmly committed to supporting the American business community in China," Gilligan said. "The continued strength of U.S.-China relations is vital to continued economic growth in both countries."