White Paper Encourages All to Meet Higher Standard

Foreign businesses look to rule of law to ease the growing pains of the economy

For AmCham China members, 2014 was one of the most challenging years in recent history in terms of revenue and profit growth. Over 30 percent of member companies have no investment expansion planned in 2015, the highest rate since the recession of 2009, and more companies than ever have moved or are planning to move capacity outside of China. Almost half of member companies feel that foreign businesses are less welcome in China than before, and almost 60 percent believe foreign firms are being singled out in recent campaigns against monopolies, corruption and product safety.

That said, there are other issues to consider, such as the difficult transition from one economic model to another. Indeed, China’s average growth rate since the 1980s of around 10 percent was driven by exports and high levels of investment. Today, the government is increasingly working to manage economic growth and expectations while emphasizing a “new normal” focused on sustainable development as the country rebalances to a model involving a greater role for services and consumption.

As reflected in the 2015 White Paper, released April 21, challenges remain, particularly around the key issues of market access and barriers to investment, opaque rules and regulatory practices, and the overall development of and respect for the rule of law. Rulemaking that is opaque, unclear or inconsistent is a key concern for many of our member companies and impacts their ability and willingness to invest in China. We believe that China’s legal and regulatory framework can be improved through development of a more robust rule of law.

AmCham China supports the streamlining of laws and regulations that impact foreign-invested enterprises (FIEs) and the way they operate in China. We also support a revision of the law that will ease the approval procedures for the establishment and operation of FIEs in China, as well as to provide for greater market access and the reduction of trade barriers that impact American companies.

We encourage the Chinese government to ensure that FIEs are allowed to participate in all phases of standards development activities, as such activities have increasingly been used to discriminate against and limit market access for FIEs.

We believe these are critical issues not just for our members, but also for the success of China’s reform agenda, and understand that they will not be remedied overnight. Foreign multinationals have contributed to, benefitted from and struggled through China’s economic reform and opening from the start. As long as China continues to recognize the benefits of global engagement and continues down the path of economic reform and establishment of consistent rule of law, opportunities will remain and American business will survive and grow.

There is hope that the two largest economies in the world can work together to their mutual benefit. If the US and China can quickly complete a high-standard bilateral investment treaty (BIT) – which has been under negotiation since 2008 – this would reduce trade barriers and open markets further for American goods and services. The US-China BIT would likely be the largest market liberalization exercise since China’s accession to the World Trade Organization in 2001. The US side is currently waiting for China to release a nation-wide negative list. A high quality, concise negative list will reduce the complexities of doing business in China while providing high-potential sectors of China’s economy with much-needed foreign capital and experience. We are hopeful that China will seriously and significantly open up further to foreign investment, especially in the financial services, agriculture, automotive and healthcare sectors. An overreaching negative list will be a nonstarter.

Much work lies ahead for all of us in 2015 and beyond as the Chinese economy continues to mature and the government implements and enforces a host of new laws that have been in the pipeline for years. The 2015 White Paper reflects that our member companies desire to play a positive and constructive role in the development of the country in a manner that is mutually beneficial to our companies and the communities in which they operate. We look forward to an open and candid dialogue with the Chinese leadership with respect to the issues raised in our White Paper.