The American Chamber of Commerce in China (AmCham China) on Tuesday (May 11) released its 2021 “White Paper on U.S. Businesses in China,” calling on China to fulfill its commitment to “national treatment” for foreign companies. The paper calls on China to fulfill its commitment to “national treatment” for foreign companies to ensure fair competition between foreign and Chinese companies in the Chinese market. In addition, representatives of the U.S. Chamber of Commerce and Chinese academics have expressed less optimistic views about the upcoming talks between U.S. and Chinese trade representatives and the future “Phase II Agreement. In particular, according to the Chamber’s survey, most U.S. business members ranked the trade friction between the two countries as the top challenge to doing business in China.
As the U.S.-China trade war approaches its third anniversary, the American Chamber of Commerce in China released its latest white paper, titled “Old and New Challenges Continue to Test U.S. Companies in China.
The Chamber notes that with the imposition of tariffs between the U.S. and China in 2019 and the sharp deterioration in bilateral relations, the political and economic situation in 2020 is even more complex, and the outbreak of a new epidemic brings more new challenges, making the economic and trade friction between the U.S. and China the top challenge for most U.S. companies doing business in China in the future.
U.S. companies are being treated unfairly
Although China enacted the “China Foreign Investment Law” in early 2020 and promised a completely level playing field for foreign and Chinese companies in the Chinese market, Chamber of Commerce President Greg Gilligan noted at a video press conference on Tuesday (May 11) that local governments are not enforcing this level playing field. But Chamber President Greg Gilligan noted at a video press conference Tuesday (May 11) that local governments are not enforcing this level playing field, especially since the Chinese government is pursuing an “internal recycling” policy, and the deteriorating U.S.-China bilateral relationship is making local officials even more exclusive of foreign companies.
American Chamber of Commerce in China President Greg Gilligan hosts a video press conference Tuesday (May 11) as the Chamber releases its 2021 White Paper on U.S. Business in China. (Screenshot from the video press conference)
When the bilateral relationship between the U.S. and China deteriorates, we often find that the marketplace (for a level playing field) is particularly poorly enforced, especially by the provincial and municipal governments where our U.S. members are located, which often favor local businesses,” said Greg Gilligan. We see that based on the level of tension between the U.S. and China, local officials often play the security card, that is, preferring local Chinese-owned companies.”
The Chamber notes that even with the impact of the New Crown epidemic (a Chinese Communist virus), U.S.-China trade and economic exchanges have remained robust, with total bilateral trade in goods reaching $560 billion in 2020. However, the Chamber also sees that many mechanisms of friendship and protection have been further undermined by the confrontation between the two countries, causing the U.S.-China relationship to continue to deteriorate in a variety of areas, such as economic and trade, national security, law enforcement, press and media, and even cultural exchanges. In addition to accelerating these deteriorating trends, the outbreak of the new crown epidemic has deepened the distrust between the two countries, causing both sides to refocus on supply chain security, corporate relocation, and protective attitudes toward their respective domestic manufacturing industries. The Chamber believes that these trends pose new challenges for U.S. companies operating in China.
Doing business in China needs to be improved
As for existing challenges, the Chamber noted that many of the long-standing business issues that plague foreign companies remain unresolved, including China’s long-standing support for its state-owned enterprises, its industrial policy that favors domestic companies, and its procurement process that offers stronger preferences for technologies and products from within China compared to foreign technologies and products. In addition, the Chamber said, China’s rigid requirements for cybersecurity and data localization, as well as network intrusion issues, also need to be significantly improved.
The U.S. Chamber of Commerce in China has more than 4,000 members, representing 900 foreign-owned companies operating in China.
Photo: U.S. Trade Representative David Deitch
U.S. Trade Representative Katherine Tai revealed last week that she will soon meet with Chinese trade representatives to assess the effectiveness of the first phase of the U.S.-China trade agreement. In response, Ge Guorui said the Chamber is happy to see the two countries start a dialogue and will also closely observe. But he does not believe that the United States will easily eliminate the import tariffs imposed on China over the past two years.
As for China’s fulfillment of the first phase of the trade agreement, he said it is a two-year commitment. Chinese purchases to the U.S. may have slowed last year due to the epidemic, but with the Chinese economy showing strong recovery forces, he expects Chinese purchases to the U.S. this year should be more aggressive in areas such as aviation, agriculture, high-tech machinery and equipment and service goods.
Continued hawkish tone in the U.S. and China
On the Biden administration’s anti-China stance, Ge Guorui said in an interview with the Voice of America that he believes there is little chance that relations between the U.S. and China will improve in the next two years.
There are a number of factors that will cause both countries to maintain a fairly hawkish style going forward, and I think that will last up to two years,” Ge said. For internal political reasons, it’s unlikely that the senior leadership of either country will show any weakness in their bilateral relationship with respect to potential challenges.”
American Chamber of Commerce in China President Lester Ross, Chairman of the Chamber’s Policy Committee, attends a video press conference Tuesday (May 11) to launch the 2021 U.S. Business in China White Paper. (Screenshot of the video press conference)
In response to questions from the Voice of America about the effectiveness of the U.S. trade war against China over the past two years, Chamber Policy Committee Chairman Lester Ross said he has seen the effectiveness of China’s reforms in the protection of intellectual property rights.
He said that on the one hand, based on U.S. pressure, and on the other hand, because intellectual property protection benefits China’s local businesses and economy, China has seen progress in legal sources and judicial enforcement, whether in patents, trademarks or copyrights, although this does not mean that all issues have been resolved. For example, he said that Chinese courts are now making “fairer” decisions for foreign investors in response to the “trademark cockroaches” who are grabbing well-known trademarks, changing the mindset of multinational companies who did not want to go through court arbitration to defend their rights.
However, in terms of industry, Ross also cited the white paper as saying that many U.S. companies continue to be treated unfairly in China. For example, U.S. TV shows and movies are being sidelined by Chinese consumers because of political factors in addition to local competition. In addition, although China is still revising its anti-monopoly law, and many U.S. mergers and acquisitions are not competitive in nature, China has a long-term tendency to boycott the approval of such mergers and acquisitions that would allow U.S. companies to grow large based on its overall industrial protection policy.
Ross also said that among U.S. companies, those most dissatisfied with the progress of the Chinese government’s policies and market opening belong to technology-related industries. He said the U.S. information and communications technology (ICT) industry is the most competitive in the world, but in China is subject to the largest market entry barriers, so he called on the Chinese government to improve these unfair treatment of foreign investors.
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