US companies find China less welcoming

飞雪寒冰

Government moves to exclude foreign businesses from parts of China's booming market have led to a jump in dissatisfaction among multinational companies and growing complaints of protectionism, according to a survey released on Monday.

The proportion of US businesses that feels foreign companies are increasingly unwelcome to participate and compete in the Chinese market rose to 38 per cent in February, up from 26 per cent just two months earlier, according to the American Chamber of Commerce in China.

That was the highest level of concern since Amcham began polling its members four years ago.

The rising discontent among US businesses comes amid worsening bilateral relations and as Washington applies pressure on Beijing to allow its currency to appreciate.

飞雪寒冰

But the mood is not restricted to American companies, with businesses from all over the world and across a wide range of sectors increasingly disenchanted about operating in China, according to Joerg Wuttke, president of the European Chamber of Commerce in China.

“The mood has obviously soured in several areas,” Mr Wuttke told the Financial Times on Monday. “Businesses feel the market is growing but the access is getting narrower.”

He said this was even leading some multinational companies to consider diversifying some investment away from China to other parts of the Asia-Pacific region, a suggestion that was rarely heard just six months ago.

飞雪寒冰

The spike in discontent among foreign businesses is partly related to new Chinese “indigenous innovation” regulations proposed at the end of last year that will require government procurement to favour products that include Chinese intellectual property.

Among US high-tech and information technology companies that responded to the Amcham survey, 57 per cent said they expected to lose business in China as a result of the new rules

飞雪寒冰

Some Chinese regional governments have already compiled catalogues of products approved for government procurement, heavily favouring domestic companies based on the indigenous innovation criteria.

A Shanghai government indigenous innovation procurement catalogue published last August includes more than 500 approved products but only two that are made by foreign-invested enterprises, both of which are joint ventures in which the foreign partner is a minority shareholder.

“For many multinational companies, China is a bright spot in the global picture right now but our survey shows member companies feel these [indigenous innovation] rules are a new kind of protectionism and will be used to exclude them from an increasingly important market,” Michael Barbalas, Amcham-China president, told the FT on Monday. “The question is whether China wants to be increasingly integrated into the global system or increasingly isolated.”