With the Chinese economy slowing and foreign companies coming under increasing government scrutiny, the still-chilly investment environment is contributing to an increasing sense of pessimism among foreign multinational companies in China.
This is reflected in a new survey showing that a majority of the members of the American Chamber of Commerce in China feel less welcome than before and almost half believe that foreign companies are being targeted, with the risk increasing that China will permanently lose its luster as a desirable investment destination.
The results showed that 60 percent of respondents feel foreign business is less welcome in China than before, and 49 percent believe foreign firms are being singled out in recent pricing or anti-corruption campaigns.
“Our members have been and remain enthusiastic supporters of China’s integration into the global economy, but sadly this survey suggests that their positive sentiment is eroding,” says AmCham China Chairman Gregory Gilligan.
Amcham China is concerned that if the investment environment deteriorates too far, important relationships and linkages between China and the rest of the world will be materially damaged, seriously impairing China’s ability to attract the investment that will be crucial in taking the country to the next stage of economic development.
“We still believe that China’s economy will emerge from this difficult period stronger than before, and US companies in particular have a great deal to offer in the services sector so crucial to the economy’s transformation," Gilligan says. "We will be closely watching the upcoming Fourth Plenum, and hope to see concrete moves toward creating a society based on the rule of law, rather than rule by law."
The "Challenges and Opportunities in China’s Investment Environment: 2014" report also said that that many encouraging signs of economic reform have emerged over the past year, yet the promise of the reform agenda has yet to be realized.
The report also suggests that many important sectors of the economy continue to be short of much-needed investment because of onerous laws, regulations and practices.
“As China’s economy rebalances from a state-led model based on exports and investment to a market-led model based on services and consumption, a difficult transition is to be expected for all private sector companies in China,” says Gilligan.
"While we still believe in China’s ability to make the changes necessary to transition to the next stage of development, delays and disruptions are leading foreign investors to alter their perceptions of the China market in fundamental ways.”