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Doing Business In China Is Getting Harder

At the start of 2022, American companies on the ground in China were optimistic about the business outlook, surveys found. Confidence had rebounded to pre-2017 levels, based in part on the country’s long-term growth trajectory.To get more china business news, you can visit shine news official website.

Then, Covid lockdowns hit Shanghai hard in the second quarter. Some 93% of respondents to an American Chamber of Commerce of Shanghai survey cut their revenue projections — more than a quarter lowered them by 20%. Covid dampened expectations for the year and sparked blunt criticism of the government by some normally diplomatic foreign business groups.

Though local governments in China have been helpful, pandemic fallout has also put into relief a larger trend: it is increasingly difficult for American companies to do business in the country, says Sean Stein, a Shanghai-based senior advisor at global law firm Covington. Prior to joining Covington last year, Stein served as the U.S. Consul General in Shanghai.
Whether you go back 20 or 30 years ago or five years, no one ever has said it's been easy to do business” in the country, Stein said at the U.S.-China Business Forum held at Forbes on Fifth in New York on Tuesday. Stein, who is also chairman of the American Chamber of Commerce in Shanghai, spoke via Zoom from Shanghai.

“But what we do see is that across the board is the consensus it's getting harder to do business. There are a lot of things that make it more difficult for American companies to do business in China.”

Why now? Stein focused on three areas beyond Covid:

* Policy. “The number one issue of concern to our members is U.S.-China tension,” he said. “Both the United States and China are taking steps to reduce dependence on the other country in their supply chains and for critical technologies,” Stein said. “This is particularly true at the central government level” in China, he said. Some American businesses “worry about how long they will be welcome in China,” Stein said.

* Compliance. The cost and difficulty of compliance is a burden for U.S. companies in China, as well as Chinese companies in America, Stein noted. “Compliance in China is increasingly complex, it's increasingly costly, it's increasingly difficult, and it requires very specialized assistance. American companies want to be compliant, good citizens, but it can be difficult ” amid greater scrutiny by competition authorities into “everything from pricing to advertising, to agreements with suppliers,” he said. New laws and regulations covering data and privacy are also a challenge, along with increasingly strict environmental standards.What’s more, standards are sometimes perceived as a means to tilt the playing field against international businesses. “Standards and certifications are creating barriers to entry in the market — creating areas where foreign companies aren't allowed to participate in the standards process,” Stein said. In some cases, “there's no transparency.”

*Competition: “Companies are increasingly worried by competition from Chinese companies,” Stein said. “We see this in our formal surveys, but we also see it when we talk to China-based CEOs when you ask them what keeps them up at night.”

“In some cases, it's an enterprising Chinese startup that is trying to cut in on their business model, or that's nimbler with technology or marketing and becoming successful. In other cases, it is part of an effort to develop self- sufficiency, and China is supporting national champions that are increasingly well funded,” he said.

An upshot and new twist in U.S.-China business ties, however, is that American companies in search of a technology edge are increasingly able to find partners in China.

“If we look back 20 or 30 years as American companies entered the market, they took on partners because they had no choice. It was required. Now, increasingly, we see American companies entering the market, looking for joint venture partners to help supplement their capabilities, such as their technology and marketing ability,” Stein said. “Whereas the licensing of technology was almost exclusively a one-way street only several years ago, we’re seeing it's increasingly going both ways.”