Report: US companies cite China business hurdles

[January 19, 2011]  SHANGHAI (AP) -- China is a crucial source of profits for U.S. businesses but product piracy, red-tape and other problems remain serious obstacles, the American Chamber of Commerce in Shanghai says in a report that coincides with Chinese president Hu Jintao's visit to Washington.

Data compiled for the report released Wednesday showed American companies profiting more than ever before in the fast-growing China market. But companies surveyed said the country remains a very challenging place to do business.

As Hu visits the U.S. along with Chinese business leaders, the group appealed for help with addressing problems hindering growth and fair competition.

Nearly nine in 10 of the 346 companies responding said their revenues grew in 2010 and 80 percent said they were profitable, the highest figures since the survey began in 1999. Nearly half said their profit margins in China were higher than their worldwide margins last year, another positive trend.

Some 80 percent of the companies surveyed intend to boost China investments to take advantage of the country's fast growth, which increasingly is spurred by local investment and demand.

"Companies realize that the future of their global business depends on being able to operate and capture domestic Chinese market share. They are here because they have to be here," said Michael Klibaner, head of research for property company Jones Lang LaSalle Shanghai, who helped brief members on the report.

The survey found that auto-related companies, which have relied increasingly on growth in China to offset slack sales elsewhere, were most confident about their opportunities in China -- now the world's biggest car market. Chemical and electronics companies also said the local market was welcoming to them.

But two-thirds of the respondents said they believed that regulation of their industries was deteriorating or not improving.

Apart from intensifying competition from both foreign and local companies, companies said finding qualified staff was their most significant challenge.

But other problems such as product and trademark piracy, preferential treatment of local companies and requirements for using locally made technology are major hurdles, the report says.

Nearly half of the companies responding to the survey reported that regulations favor domestic companies over foreign rivals, especially in the $88 billion government procurement market.

"It is essential that the U.S. continues to aggressively engage China to address key business challenges that hinder market access today and could impact future investment," said the American Chamber of Commerce in Shanghai's president Brenda Foster.

"Bureaucratic licensing procedures, information restrictions and uneven enforcement standards all present daily operational challenges that can hinder growth," the report said.

"A lack of transparency in China's rulemaking process and regulatory oversight is also an ongoing challenge," it said.

Given China's massive trade surplus, American businesses have long complained that China sells far more to the U.S. than it buys. China, in turn, chafes at restrictions on exports of sensitive technology that it says prevent it from buying many expensive, high-tech products.

A 100-member Chinese business mission linked to Hu's three-day state visit to China was shopping for American products and services.

Some $600 million in deals were signed by a separate trade mission earlier this week, including purchases of porcelain and cotton and an agreement to collaborate on developing solar power equipment.

[Associated Press; By ELAINE KURTENBACH]

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