2014 Business Climate Survey
For businesspeople in China, 2013 was the start of a transition, with new leadership, new expectations, and a break with the past. While China has largely avoided the turmoil created by the global financial crisis, it has nevertheless become clear that the current economic model has run its course, and the nation’s leaders now need to guide the country into uncharted waters. This year’s Business Climate Survey reflects the new realities of operating in China and the associated uncertainty, but also the optimism and confidence among AmCham China members that the country’s leadership is set on reform and that foreign business has an important role in China’s future.
The economic situation is clearly evolving rapidly for both domestic companies as well as foreign ones. Our members are certainly not alone in experiencing declines in revenue and profitability growth in China. And while this year’s survey shows that China is increasingly viewed as just one of many investment possibilities for our members, rather than a priority, this should be seen in the context of Chinese companies also investing more overseas than ever. Even so, there is no cliff here. Current attitudes toward the business environment in China represent the continuation of a trend that has been developing over the past few years, and perhaps a healthy reassessment of expectations. Foreign investment in China grew more than 5 percent during 2013, and more than three-quarters of our members are optimistic about the next two years.
The biggest challenges for business in China will be familiar to anyone who has followed the Business Climate Survey over the past few years. Finding and keeping talent, and the associated costs, continues to be a primary concern for our members. To reflect the seriousness of human resources issues and their enduring nature, we have this year gone into greater depth in the survey and present the results in a section dedicated to the subject.
Nevertheless, human resources is one of a number of issues that have a broad impact in China. Rising costs, difficulties in obtaining reliable data and the influence of state-owned enterprises affect all private companies. However, there are some problems that fall disproportionately on foreign companies. Licensing and the protection of intellectual property rights remain significant issues for our members. But even in IPR, there has been progress, with two in five respondents noting an improvement over the past five years.
It’s also important to note the questions we’ve added this year. The bilateral investment treaty and Shanghai pilot free-trade zone represent important new reform initiatives on issues very close to the hearts of our members. Significant uncertainty remains, but the survey results reflect confidence that the nation’s leaders understand the challenges and that these moves are in the right direction.
While this year’s Business Climate Survey lays bare the difficulties faced by foreign business in China, it also demonstrates optimism that the transition apparent in 2013 is just the beginning of a new era in China’s development. Many tough decisions remain for the country, but the most difficult decision, to embrace reform, has already been made.