U.S. COMPANIES IN CHINA SEE BILATERAL RELATIONSHIP AS CRITICAL WITH GROWTH SLOWING AND REGULATORY CONCERNS RISING
Latest AmCham China survey developed in collaboration with Bain & Company shows almost three-quarters believe bilateral ties are critical, but China declining as a global investment priority
Beijing – January 18, 2017 – American business in China is increasingly focusing on the health of the U.S.-China bilateral relationship as growth in China slows and regulatory challenges for foreign companies expand, according to a new survey released by the American Chamber of Commerce in China in partnership with Bain & Company.
The 2017 Business Climate Survey found that 72 percent of respondents feel that a positive bilateral relationship between the U.S. and China is critical for business, yet 83 percent of respondents expect bilateral relations to remain the same or to deteriorate this year. The big question for many member companies as 2017 dawns is how the bilateral relationship may affect their business, and what steps both governments will take to ensure a positive business environment.
Click the link to read the 2017 Business Climate Survey Report.
“In many areas of the economy that should be driving growth – from finance and insurance, to logistics and healthcare – the handbrake of regulation is still firmly on,” said William Zarit, Chairman of the American Chamber of Commerce in China. “The resulting distortions in the economy benefit the few at the cost of the many, but it doesn’t have to be like this. Globalization doesn’t just mean exporting and buying up foreign assets, but also making sure that Chinese workers, private companies, farmers and consumers benefit from dynamic, open markets for goods and services. With both the U.S. and China undergoing political transitions, we hope the results of this survey can stimulate healthy debate over China’s future.”
Michael Thorneman, Bain senior partner in China, said: “It’s clear that companies recognize the importance of bilateral relationships with China and its importance as a key market. They also understand that they’ll need to address and answer a number of strategic questions in order to ensure that they find avenues of success and continued growth. Those surveyed are managing increasingly complex operations in the face of a stagnant or deteriorating investment environment – with slower growth, rising costs, and an ongoing war for talent; exacerbated by unclear regulations and uncertainty about bilateral relations.”
This is the 19th year that AmCham China has surveyed its members on the business environment in China, and the third year it has partnered with Bain & Company for data collection and in-depth analysis. This year’s survey generated a record response rate, and the final report analyzed 462 responses out of 849 member companies.
This year the share of companies that say China is a top-three global priority dropped to 56 percent from a peak of 78 percent in 2012. Investment and hiring plans reflect these shifting priorities, with almost one-third of companies stating no plans to increase investment in 2017, and 39 percent saying their investment budgets will rise by less than 10 percent.
While both foreign and domestic companies feel the impact of slower economic growth, this year’s survey shows that AmCham China member companies are increasingly reconsidering their investments because of unfavorable regulations and other policy-related challenges. Even among those who maintain operations in China, most respondents say China’s environment now discourages investment, with eight in 10 saying they feel foreign companies are less welcome than in the past, and more than 60 percent having little or no confidence that the government is committed to opening China’s markets further in the next three years.
Despite these challenges, companies are looking for ways to adapt and grow in what is still a key market and so are aiming to succeed by investing more in innovation in China and by branching out beyond core markets and customer segments. This year, more than 90 percent of AmCham China members say that innovation is an important priority for their success. At the same time, however, companies cite ongoing barriers to innovation, including uncertainty about intellectual property protection, access to talent, and concerns over data security.
“It’s clear from these findings that many foreign companies are being forced to rethink their strategies to respond to the challenges in the business environment. The country remains an important market for most multinationals, but we are seeing a significant shift in what foreign businesses are prioritizing,” said Stephen Shih, a Bain partner based in Beijing. “Innovation in China and operational efficiency will need to be at the top of the agenda for companies in 2017. More companies will also be re-evaluating the role of China in their global portfolio of markets.”
The survey also found:
- The average forecast for 2017 GDP growth is 6.1 percent
- 58 percent of respondents expect higher revenues in 2016
- Cost reduction is now one of the top priorities for more than half of respondents
- Seven out of 10 member companies said that three-quarters of top country management teams are native Chinese
About AmCham China
The American Chamber of Commerce in the People's Republic of China is a non-profit, non-governmental organization whose membership comprises more than 3,300 individuals from 900 companies operating across China. The chamber's nationwide mission is to help American companies succeed in China through advocacy, information, networking and business support services. AmCham China is the only officially recognized chamber of commerce representing American business in mainland China. With offices in Beijing, Tianjin, Dalian, Shenyang and Wuhan, AmCham China has more than 50 working groups, and holds more than 250 events each year. Visit: www.amchamchina.org
About Bain & Company
Bain & Company is the management consulting firm that the world's business leaders come to when they want results. Bain advises clients on strategy, operations, technology, organization, private equity and mergers and acquisition, developing practical insights that clients act on and transferring skills that make change stick. The firm aligns its incentives with clients by linking its fees to their results. Bain clients have outperformed the stock market 4 to 1. Founded in 1973, Bain has 53 offices in 34 countries, and its deep expertise and client roster cross every industry and economic sector. For more information visit: www.bain.com. Follow us on Twitter @BainAlerts.
For more information, please contact:
Lin Lin
AmCham China
Tel: +86 10 8519 0831
Nicholas Worley
Bain & Company
Tel: +852 2978 8830