AmCham China Legacy: A Better Business Environment

Learn more about the people and stories behind the chamber's work facilitating healthy relationships between government and business

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Former Chairman John Holden and Vice Premier Wu Yi in 1997.

The first objective in the chamber’s constitution is to “enhance the business environment in China.” Over the years, as well as providing a place for the foreign business community to gather, the chamber has developed a set of tools based on the values laid out in the constitution to help China become a better place to do business, for the benefit of China as well as foreign multinationals. There have been many successes, as well as some failures, but the good intentions have remained throughout.

Many of these ups and downs have been captured in the chamber’s magazine (and subsequently website), which has been an important resource in keeping members up to date with developments in the business and political environment in China. An article from one of the chamber’s early magazines from 1994, for example, discusses the implications of a labor law approved that year. “As with many Chinese laws, there is a great deal of flexibility in the implementation of policy, so please let AmCham or myself know of your experiences,” writes the author, Chuck Hamrick of Beijing Warner Gear.

An early initiative of the chamber was to survey its members’ opinions. In 1995, the chamber conducted at least five surveys, including on compensation, housing, the World Trade Organization (WTO) and intellectual property rights (IPR) protection.

“We tried to start putting together the kind of information companies needed to make decisions in a market like that,” said Jane Redicker, the chamber’s first Executive Director from 1995-98, a position now known as president.

The early surveys were very simple. The Policy & Public Affairs Committee Survey from 1995, for example, had just 12 questions. Respondents had to express the importance, on a four-point scale, of issues such as “Inability to import, sell, install and/or service your company’s own equipment,” or “Dual pricing of Chinese and foreigners (i.e., hotels and airfare).” The results of the survey showed that high entry costs were the No.1 challenge members faced, followed by the “general difficulty of doing business in China,” although it should be noted these two options (plus an “other” option) were the only choices available in that category.

By the end of 1997, the surveys became more sophisticated, and members’ top concerns wouldn’t seem out of place today:

1. Restrictions on the scope of business

2. Lack of transparency of rules and regulations

3. Inconsistent enforcement of rules and regulations

4. Difficulty of hiring Chinese employees

5. High import tariffs and taxes

By 1999, the survey had adopted its current name, the Business Climate Survey, and its influence beyond the chamber has expanded greatly. In the 2016 survey, just shy of 500 responses were analyzed, and the results are used by news media and commentators throughout the year to justify the full spectrum of positions on many issues.

The chamber also actively contributes to the drafting of laws and regulations. Where its members have expressed an interest, the chamber has submitted comments to draft laws, sometimes with significant impact.

One interesting example comes from 1998, when the National People’s Congress was working on a new contract law to replace the range of laws and regulations on various different kinds of contracts. AmCham China got a copy of the draft law, and the Legal Committee at the time translated it and provided numerous comments. When the law came out, it included around a quarter of the suggestions.

“As Chairman of the Legal Committee, I got a letter from the NPC Legislative Affairs Committee thanking us for our comments and saying they had been really valuable,” said Tim Stratford, who subsequently became the chamber’s Chairman. “This was one of the earliest opportunities I know of where we were really involved in trying to provide input into the legislative process.”

Getting it in writing – the White Paper

Around this time the chamber also started working on what became its flagship publication, the American Business in China White Paper, an annual summary of the major issues for member companies with recommendations for both the US and Chinese governments. The idea came from AmCham Taipei, which every year produced a special issue of its magazine focusing on the major regulatory issues facing its members there.

“China was getting ready to get into the WTO, and there was a consensus that as a business community, we have to speak up,” said lawyer Tibor Baranski, who served on the drafting committees for the first two years of the White Paper’s existence when he was Chief Rep of a Japanese law firm in Beijing. “As a community, we can raise issues that individual companies would find very difficult, if not impossible, to raise.”

There was a high degree of reluctance among the board, as well as the staff, to embark on a project that was clearly going to be a lot of work, especially if it was going to be an annual exercise. But eventually the decision was made to go ahead, and volunteers stepped forward to write chapters that would be compiled by the Public Policy Committee under Christian Murck, who later led the chamber as both Chairman and then President. It was written based on principles similar to those employed by AmCham Taipei when Murck was Chairman there.

“You start by trying to give a very frank, concrete, non-polemical, informative view of what’s going on,” Murck said. “Second, you try to do it from a win-win perspective, because we’re all foreign companies here and therefore guests of the government. Finally, you avoid allowing the White Paper to be focused on the needs of any single company.”

The first White Paper was 65 pages long, and was structured in a similar way to those today. There was a macroeconomic analysis, followed by business issues, industry-specific issues and recommendations. And it was bilingual, also as they are today, making it a source document for describing the relevant issues in Chinese.

Then-president Michael Furst (1998-2003) remembers the first White Paper in particular attracting a lot of attention. The timing was good, as negotiations over China’s accession to the WTO had reached an impasse, and because it was largely written by the membership, its credibility in reflecting the interests of American business meant it “could not be ignored,” Furst said. “The original White Paper methodology was so compelling, so powerful that it was hard to differ with or argue against.”

Kim Woodard, who has been an active member of the chamber since 1998 in various roles including head of the Public Policy Committee, remembers how well the White Paper was received by Chinese officials.

“The Chinese ministries involved would read chapters relevant to them thoroughly, and then we’d go talk to them about it,” he said. “They were very concerned about where the negotiations would come out on WTO, and they really needed AmCham’s support and the support of the American business community.”

Quickly the White Paper became established and processes set in place for its production and publication. After a few years, AmCham Shanghai joined its production, and it has periodically included chapters from other AmChams around China. It also grew in size, reaching a peak of 391 pages in 2011.

An important aspect of the White Paper is how it is presented. After publication, the chamber’s Government Affairs team reaches out to government departments and agencies to discuss the issues raised in its various chapters. The meetings have often been with vice minister or director-general level officials, but while high-profile hosts may seem appealing, often it is the working-level officials who can actually act on members’ suggestions. At one meeting in 2005, an AmCham China member noticed the official’s copy of the White Paper was bristling with Post-it notes.

Also in 2005, as an example of the level of cooperation at the time, more than 30 members visited the Administration of Quality Supervision, Inspection and Quarantine (AQSIQ), and discussed with 10 officials issues of licensing, testing and certification.

“Nearly all relevant departments in AQSIQ sent specialists to the meeting and answered questions from AmCham delegates,” the chamber’s magazine quoted one member as saying. “Confusions were clarified, concerns were addressed, implementation guidelines were explained and suggestions were recorded.”

But even in that year, in which the chamber identified “a trend toward more open and detailed talks,” three ministries refused to accept a meeting: the Ministry of Construction, the State Administration of Radio, Film and Television, and the Ministry of Information Industry.

Wangli Moser, head of the Chinese Government Affairs Committee during the early years of the White Paper, said that the first couple of years it was pretty straightforward to set up White Paper delivery meetings with ministries, but then became more challenging.

“They will give you tasks, too,” she said. “They’ll say, ‘I want to have an in-depth discussion, so you need to bring your experts here,’ which wasn’t easy to do.”

Appreciation Dinner

US Ambassador Joseph Prueher and Minister for Foreign Trade and Economic Cooperation Shi Guangsheng at the first AmCham China Appreciation Dinner in 2000.

Another important tool for engaging the government is the Appreciation Dinner. The first was held Dec. 5, 2000, at the Kerry Center Hotel. More than 400 people attended the event, including US Ambassador Joseph Prueher and keynote speaker Minister for Foreign Trade and Economic Cooperation Shi Guangsheng.

“It is my hope that the American friends in business circles who are dedicated to investing in China will keep up with the pace of China’s future modernization, consistently explore new channels to enhance our cooperation both in depth and in magnitude, and consequently give full play to their own capital input, technology and management,” Shi was quoted as saying in the chamber’s magazine.

Moser said balancing the interests of so many guests was challenging.

“Assigning the seats was such a headache,” she said. “Government officials don’t confirm until the last minute, and the companies have expectations. If we had a director-general from the NDRC, everyone wanted to grab that person to be at their table.”

But access to influencers in the Chinese government wasn’t restricted to the Appreciation Dinner. Former Chairman John Holden (1997) remembers meeting several times with Premier Zhu Rongji, and Wu Yi, then Minister of Foreign Trade and Economic Cooperation who later became a Vice Premier.

“It was just fun talking with her. We sparred a little bit on different issues, but tried to lobby her on the issue of the day,” Holden said. “The access we had was just incredible.”

Many of the guests at the Appreciation Dinner come from local-level administrations, and indeed AmCham China has aimed to influence not just the national business environment, but also the local one. In 1999, in what was described as an “unusual” request for meetings from the Beijing City Government, the chamber took the opportunity to suggest improvements to the very practical issues of trying to do business in the capital city. Many of the issues reflected those at the national level, such as transparency, tax and hiring Chinese workers directly instead of through FESCO. Beijing-specific issues included, even in those days, traffic and air pollution. The head of the Foreign Economic Relations and Trade Commission assured the chamber’s members that air pollution and traffic congestion would be the focus of the municipal government’s work that year.

Holden recalled another occasion around that time when the Beijing municipal government proposed introducing a tax that would have disproportionately affected expatriates and high-performing Chinese nationals.

“Member companies and the chamber got involved, telling the Beijing government that it was unfair, and that it was a huge disincentive to business,” he said. “And they changed the policy.”

The chamber has also engaged local governments through numerous trips for members to cities and provinces of interest, with of course a special focus on the areas where AmCham China operates chapter offices: Tianjin, Wuhan, Dalian, and Shenyang. (See photo, below, of then-Executive Director of AmCham China Michael Furst shaking hands Vice Mayor of Wuhan Yin Zengtao in 1999 to celebrate affiliation of AmCham Wuhan with AmCham China.)

Increased interest in provincial outreach gained pace during the chairmanship of Emory Williams (2005-2006), who himself had started investing outside first-tier cities.

“I found there was so much going on out there that was invisible to many of our members who were still focused, as I had been, on first tier cities,” Williams said. “I thought the businesses in AmCham would benefit from seeing what was going on in the heartland.”

During this period, there were several Chinese national-level initiatives promoting investment in the northeast, central and western parts of the country, but it wasn’t always easy for individual companies to meet the right people and understand the opportunities.

“So AmCham became a very effective umbrella for helping interested companies understand what more localized companies were doing and to establish beachheads on those cities in which they found a favorable environment,” he said.

Inter-chamber cooperation

The chamber has also on occasion cooperated with other chambers. An early example was in 1999, in response to regulations introduced by China’s State Council on security encryption. The regulations were very broad and intrusive, and banks in particular were worried that, if implemented, they could compromise the security of their operations.

“We had a lot of intense meetings during the fall of 1999 where the Americans, the Japanese and the Europeans got together,” said Baranski, an AmCham China member since 1996 who has also been active in the Japanese Chamber since that time and currently serves on its Board of Trustees. He helped coordinate the drafting of a letter expressing the concerns of foreign chambers of commerce, which was presented at a high-level meeting at the Ministry of Commerce in March 2000. “It was the first time ever that the three major players jointly did such an effort, and we succeeded,” he said.

But it certainly wasn’t the last. Around a decade later, the government introduced requirements that government-procured goods include “indigenous innovation,” a controversial requirement that basically excluded foreign companies from competing for business from government-run entities.

John Watkins, who was Chairman at the time (2009-2010), said there was a lot of discussion on the board and between other trade organizations about how to respond. Eventually we decided to make our opposition clear both privately and publicly. “We took a stand, and said: ‘This is wrong,’” he said. “Those of us who had been fighting since the early-1990s for China’s MFN (Most Favored Nation) status and WTO accession, we felt betrayed.”

The opposition to indigenous innovation, most tangibly in the form of a letter and a front-page article in the Wall Street Journal, marked a significant change to the era of largely unqualified support for China’s approach global economic interactions.

“The Ministry of Commerce was surprised by the strength of our position,” Watkins said, causing them to rethink the policy and the way it was being implemented. However, he acknowledged that the policy is returning in other guises. “We won a battle, but probably not the war.”

Cooperation Programs

The chamber’s cooperation programs are yet another example of how the chamber has expanded its reach, applying a model akin to public-private partnerships.

The US-China Aviation Cooperation Program (ACP), with 13 founding companies, was born from the chamber’s Aerospace Forum, which won a $500,000 grant from the US Trade and Development Agency for its “Wright Brothers” program of training in China in 2004. It was the brainchild of David Wang, then President of Boeing China, and Joe Tymczyszyn, a senior official with the Federal Aviation Administration and later head of the ACP’s operations in China. They saw the threat of a unified European aviation sector and the opportunity of an underdeveloped regulatory environment in China as the catalyst for cooperation between American companies and the US and Chinese governments. The goal was to aid understanding among American companies of the needs of China’s aviation sector, help with the development of Chinese aviation through training programs and build goodwill toward US aviation companies.

The importance of the program was underlined by the involvement of US Transportation Secretary Norman Mineta, who personally presented the first TDA grant to ACP during a visit in July 2004.

“Through this program, we seek to increase awareness of US technology, product standards and services that will assist China in developing its aviation infrastructure,” he told AmCham China members.

The Export Compliance Working Group was created in 2006 out of a partnership between AmCham China and AmCham Shanghai to help US companies effectively navigate the restrictions on high-tech exports from the US that could have military purposes. It focused on reporting on the current state of Chinese capabilities so the US government could better refine its restrictions to products that really were unavailable in China. Its evidence-gathering included a survey in 2009 that showed US companies were losing hundreds of millions of dollars of sales because of unnecessary export controls that forced customers into the arms of competitors from other countries.

The US-China Energy Cooperation Program formed in September 2009 with the aim of leveraging private sector resources to promote clean energy and energy efficiency. Its 24 founding member companies, which included Caterpillar, Boeing and Cummins, set up no fewer than nine working groups covering a wide range of traditional and sustainable energy sources.

The US-China Healthcare Cooperation Program (HCP) started in March 2011 to build closer working relations and long-term cooperation between the US and Chinese governments and industry in the healthcare sector (see page TK for one of its recent projects). The most recent addition to the family of cooperation programs is the Agriculture and Food Partnership (AFP). Created in 2013, the AFP’s mission is to link US and Chinese public, private and non-governmental organizations across the agricultural and food supply chain with the aim of advancing food security, food safety and agricultural sustainability.

Working groups – the heart and soul of the chamber

But the real driving force behind the chamber’s activities is its more than 50 working groups across China, supporting members and their companies with policy, information and networking. An example of how these groups can move the needle is the Work Safety Committee, which was recognized for its success by being named Committee of the Year in 2014. Created in 2011 and led by Terex and Oshkosh, two leaders in the manufacture of equipment to make working at height safer, the Work Safety Committee is one of the younger working groups in AmCham China. Its mission was to help the government revise out-of-date regulations, improve the lot of construction workers and develop the market for safety equipment.

The committee made important progress during 2014 in helping update the “Safety and Technical Standard for Work at Heights in Construction Job Sites,” which was originally enacted in 1991. And the previous year it organized a “reverse trade mission” of Chinese government officials to meet their counterparts at the US Department of Labor and visit the production facilities of Oshkosh and Terex group companies.

“Through the AmCham China platform, we have been able to contact high-level officials who are responsible for the country’s work safety regulations, pressing our case to update and improve those regulations,” said Giovanni Hou, Director of customer support and business development at Oshkosh. “By being able to reach people at the top, it’s easier to influence those who actually execute the policies.”

The Work-Safety Committee wins Committee of the Year in 2014.

Making progress

While it’s difficult to separate the chamber’s influence from all the other influences in China’s business environment, there have nevertheless been great improvements in many areas of importance to its members.

IPR protection, for example, remains a significant problem but has improved immensely since the 1990s, when it was the cause of major frictions between China and its trading partners. In the mid-1990s, the US had been ramping up pressure on China regarding the theft of IPR and its impact on American exports. The so-called Section 301 investigation almost resulted in the imposition of sanctions on China, and the chamber itself had mixed views. A survey showed that nearly a third of members supported sanctions, while almost 60 percent opposed.

Nevertheless, the two sides reached a last-minute deal. “This issue tested our processes for developing AmCham position on public policy issues,” wrote then-Chairman William Warwick (1995). “The learning will be applied to addressing future public policy issues.”

The issue would continue to place a strain on US-China relations and the business of foreign companies operating in China, and in 2004, the chamber established an IPR Forum. At the Appreciation Dinner that year, guest of honor Commerce Minister Bo Xilai said: “The two most popular English words used by Chinese people: one is WTO, the other is SARS. And I believe that very soon we are going to see IPR be the third.”

The chamber even went so far as to invite the editors of Chinese publications to discuss the importance of IPR and what it meant to their readers. The event uncovered that the publications themselves had been victims of IPR theft, when their articles were stolen by competing publications without attribution.

The following year, more than three-quarters of member companies said they had been “negatively affected by IPR infringements.” The poll, conducted with AmCham Shanghai, showed that for a quarter of companies, IPR risks had slowed their China investments.

For a period, at least, the government seemed keen to engage the foreign business community of the issue of IPR. In 2006, AmCham China signed an MOU with Beijing’s Chaoyang District Government to create a copyright infringement-free zone. The following year, Vice Premier Wu Yi invited AmCham Chairman James Zimmerman to speak at the China High-Level Forum on Intellectual Property Rights Protection 2007.

The tide seemed to turn in 2008, with the percentage of respondents to the Business Climate Survey that year saying that their company was suffering from counterfeiting falling from 40 percent to 28 percent. By 2016, more than nine in every 10 respondents to the Business Climate Survey said that the enforcement of IPR had improved over the previous five years.

WTO implementation

A major concern of the early White Papers was China’s implementation of its WTO commitments. Having supported China’s entry into the WTO (see story on the chamber's contributions to US-China relations), AmCham China members needed to ensure the promised progress was made. In early 2002, Stratford hosted a seminar to help members understand what to expect, and what the chamber was doing to monitor China’s progress in honoring its WTO commitments. In particular, the chamber produced a monthly status report to the US Trade Representative and US Embassy. It also produced an AmCham WTO Update to the chamber’s industry forums every month.

“In the auto industry we’d identified five critical barriers that were limiting our participation in the China market,” Stratford said. All five were addressed in the final agreement, “and that revolutionized the auto industry in China. At the time, the domestic auto industry was worried that foreigners were going to come in and dominate the market, but it fact it was a boon for every participant in the auto market.”

However, China’s WTO implementation wasn’t flawless. Addressing AmCham China members in 2006, US Trade Representative Susan Schwab revealed the findings of a cross-departmental report that found US-China trade to be still inequitable and unbalanced.

“This disparity is due in large part to China’s failure to honor certain commitments, including its failure to adequately enforce intellectual property rights, its efforts to protect and support certain domestic industries, and its delay in fulfilling certain market-opening obligations,” she said. “Left unaddressed, these problems pose a real danger to the health of the relationship.”

One area from China’s WTO accession that remains unresolved is China’s failure to sign on to the WTO’s Agreement on Government Procurement (GPA). The GPA requires signatories to provide transparent rules and processes on government procurement, and to not discriminate against foreign suppliers who are also parties to the agreement. Membership of the group is voluntary, but as part of China’s WTO Accession Agreement, China agreed to accede to the GPA “as soon as possible.” It also agreed to ensure the rules applied to local governments as well as the central government. Fifteen years later, China looks no closer to fulfilling its promise.

In fact, legislation passed two years after it joined the WTO, while incorporating some procedural disciplines from the GPA, nevertheless allows central and local governments to discriminate in their purchases. It wasn’t until December 2007 that it made its first accession offer, which was dismissed by the other parties to the agreement. In 2013, China committed to making an accession offer that was “on the whole commensurate with the coverage of GPA parties.” Yet its fifth offer, submitted a year later, still fell short, and it said it would not be making any more offers.

Setting the standard

Another area that has proved frustrating for AmCham China members is standards. Dozens of technical committees produce national standards for numerous aspects of products and services, yet they are frequently unaligned with international practices.

An article in the chamber’s magazine in 2002 flagged many of the problems members still face today. Noting that a lot of progress had been made in the previous two years, including the establishment of a unified China Compulsory Certification mark, the article warned that major issues were developing in the areas of transparency, testing, coordination and rationalization. It recommended companies set up structures to monitor and influence the development of standards as well as compliance with them.

Later that year, the Standards Forum was created, hosting several events with the US Embassy and US standards agencies to better understand the situation in China.

In 2004, the chamber signed up four US standards associations and won a $500,000 grant from the Department of Commerce to create the Consortium for Standards and Conformity Assessment. Representing 150,000 members, the associations covered oil and gas, materials, products, systems, engineering and high technology. In its first year it conducted various trainings and workshops with Chinese standards officials and then gradually expanded its operations until it moved out of the AmCham China offices in 2006.

But by 2015, standards were still enough of an issue for members that it was one of the chamber’s four policy priorities that year. In particular, Chinese Technical Committees frequently excluded full participation by foreign-invested companies and developed standards according to opaque procedures, or developed standards that contradict or duplicate those that are already internationally recognized. “China’s standardization system still imposes a number of barriers to market entry that remain a concern for AmCham China member companies,” reads the 2015 White Paper.

Taking the long view

Those who wonder about the quality of the operating environment in China today should spare a thought for those trying to do business here in the 1980s. Irl Hicks, the chamber’s Chairman in 1990 and country head for Babcock Wilcox’s industrial boiler factory, recalls electricity being shut off one day a week, and that telex was the main form of international communication because the phone system was so bad.

“Overseas calls were all-night work: call to get scheduled with an operator (including somebody to listen to your call), wait two or three hours, and finally talk to somebody — if they weren't at lunch,” he said.

An interesting gauge of China’s business environment is the Doing Business series, produced every year by the International Finance Corporation, the private lending arm of the World Bank. Its first report in 2004 placed China as a middling country by most measures. Starting a business, for example, was slightly less of a hassle than average in the region, but more troublesome than the average of all countries in the Organization for Economic Cooperation and Development. By 2016, it seems little has changed. This year’s report actually provides rankings, showing that for starting a business, China ranks 136 out of 189 countries, down nine places from the previous year. Overall, China’s business environment ranks 84, with the highest category ranking of 7 for enforcing contracts, and the lowest rank of 176 for dealing with construction permits.

Former Chairman Jim McGregor (1996) said that American business had made a huge contribution to China's development from a weak commercial base, especially with drafting laws and sharing knowledge with local work forces.

“Ultimately, why are we here? It’s the Chinese people,” he said. “Chinese people are pretty damn incredible – they’re hardworking, they’re loyal, honest, and I think China’s going to head in a direction of more openness, eventually.”