Doing business in China is getting harder: US-China Business Forum

In the year US companies on the ground in China are optimistic about business as early as 2022, studies have found. Confidence has risen to pre-2017 levels based on the country’s long-term growth trajectory.

Then the Covid lockdowns hit Shanghai hard in the second quarter. A survey by the American Chamber of Commerce in Shanghai found that 93 percent of respondents had cut their revenue forecasts — more than a quarter by 20 percent. Covid has dampened expectations for the year and sparked blunt criticism of the government by some traditionally diplomatic foreign trade groups.

Although local governments in China have been helpful, relief from the epidemic has also brought more relief. It is very difficult for American companies to do business in the country, said Sean Stein, senior counsel at the Shanghai-based international law firm Covington. Before joining Covington last year, Stein served as the US consul general in Shanghai.

“If you go back 20 or 30 years or even five years ago, nobody said it was easy to do business in the country,” Stein said Tuesday at the fifth US-China Business Forum in New York. Stein, chairman of the American Chamber of Commerce in Shanghai, spoke via Zoom from Shanghai.

But what we’re seeing is that it’s getting harder to do business on consensus across the board. There are many factors that make it difficult for American companies to do business in China.

why now Stein focused on three areas beyond Covid.

* Policy. “The number one concern of our members is US-China tensions,” he said. “Both the United States and China are taking steps to reduce dependence on their supply chains and critical technologies,” Stein said. In China, “this is especially true at the central government level,” he said. Some American businesses are “concerned about how long they will receive in China,” Stein said.

* Compliance. Cost and compliance issues are a burden for American companies in China, as well as Chinese companies in America, Stein pointed out. “Compliance in China is increasingly complex, expensive, difficult, and requires specialized assistance. “American companies want to be compliant, good citizens, but it can be difficult,” he said as competition officials scrutinize more, “from pricing to advertising, to agreements with suppliers.” New laws and regulations covering data and privacy are also challenging, as are increasingly stringent environmental standards.

Moreover, standards are sometimes seen as a means of tilting the playing field in favor of international businesses. “Standards and certifications are creating barriers to market entry — creating spaces where foreign companies are not allowed to participate in the standards process,” Stein said. “No transparency” in some cases.

* Competition: “Companies are worried about competition from Chinese companies,” Stein said. “We see this in our regular surveys, but we see it when you ask CEOs in China what gets them up at night.”

“In some cases, it’s a Chinese startup that’s trying to tackle their business model, or an enterprise that’s becoming more and more successful through technology or marketing. In other cases, it is part of an effort to develop self-reliance, and China increasingly supports well-funded national champions, he said.

A big new development in the US-China business relationship, however, is that US companies seeking a technological edge can find partners in China.

“When U.S. companies entered the market 20 or 30 years ago, they had no choice but to partner. It was needed. Now, more and more, as U.S. companies enter the market, we’re seeing joint venture partners to help them meet their strengths, such as their technology and marketing capabilities,” Stein said. While technology licensing was almost exclusively one-way several years ago, we’re seeing it increase both ways.

“When I talk to our members, I see how the revenue from China can go towards R&D that helps US companies stay competitive. “I see American companies competing in the world’s fastest-growing markets, and the strong competition they face helps them grow their economies and become globally competitive,” Stein said. “And if a company is not active in this market, it is difficult to imagine how it will be successful on a global scale.”

4^Th The US-China Business Forum is organized by Forbes China, the Chinese-language edition of Forbes. The meeting was held in person for the first time since 2019. Conducted online during the 2020 and 2021 covid 19 pandemic.

Other speakers include Qin Gang, Chinese Ambassador to the US; Wei Hu, Chairman, China General Chamber of Commerce – USA; James Shih, Vice President, SEMCORP; Abby Li, Director of Corporate Communication and Research, China General Chamber of Commerce; Audrey Lee, Executive Director, BYD America; Lu Cao, Managing Director, Global Corporate Banking, Corporate and Investment Banking, JP Morgan

Stephen A. Orleans, president of the National Committee on United States-China Relations, spoke. Ken Jarrett, Senior Consultant, Albright Stonebridge Group; Dr. Bob Lee, Physician Ambassador for China and Asia-Pacific, Memorial Sloan Kettering Cancer Center; and Yue-Sai Kan, co-chairman of the China Institute.

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