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Doing business in China is getting harder: US-China Business Forum

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At the beginning of 2022, American companies based in China were optimistic about their business prospects, according to a survey. Confidence has returned to pre-2017 levels, in part based on the country’s long-term growth trajectory.

Then the Covid lockdown hit Shanghai hard in the second quarter. About 93% of respondents to a survey by the American Chamber of Commerce in Shanghai have lowered their earnings forecasts. He lowered his forecast by more than a quarter to 20%. Covid has cooled hopes this year and sparked outspoken criticism of the government from some of the normally diplomatic foreign business groups.

Chinese local governments have helped, but the impact of the pandemic has highlighted a larger trend that it is becoming increasingly difficult for US companies to do business in China, said Shanghai-based Global Law. Sean Stein, a senior counsel at the firm Covington, said. Prior to joining Covington last year, Stein served as the U.S. Consulate General in Shanghai.

“Whether you go back 20, 30 or 5 years ago, I said it’s easy to do business in this country,” Stein said Tuesday at the US-China Business Forum at Forbes in New York. There will be no such thing.” Stein, who is also president of the American Chamber of Commerce in Shanghai, spoke via Zoom from Shanghai.

“But what we’re seeing is that there’s a general consensus that it’s getting harder to do business. There are many factors that make it harder for American companies to do business in China. there is.”

why now? Stein focused on his three areas outside of Covid.

* policy. “The biggest concern for our members is the tension between the United States and China,” he said. “Both the United States and China are taking steps to reduce their dependence on the other country for their supply chains and critical technologies,” Stein said. he said. Some U.S. companies are “worried about how long they will be welcomed in China,” Mr. Stein said.

*compliance. The cost and difficulty of compliance is a burden not only for US companies in China, but also for Chinese companies in the US, Stein said. “Compliance in China will become increasingly complex, expensive, increasingly difficult, and will require highly professional assistance. American businesses want to be compliant and good citizens. But that can be difficult as competition authorities increasingly scrutinize everything “from pricing to advertising to contracts with suppliers.” New laws and regulations covering data and privacy is also a challenge, along with increasingly stringent environmental standards.

Additionally, standards are sometimes perceived as a means of tilting the playing field for international business. “Standards and certification create barriers to entry into the market, creating areas where foreign companies are not allowed to participate in the standards process,” he said. In some cases, there is no “transparency”.

*Competition: “Companies are increasingly concerned about competition from Chinese companies,” says Stein. “We see this in formal research, but we also see it when we ask China-based CEOs what keeps them up at night.”

“In some cases, it’s an enterprising Chinese startup trying to break into the business model, or it’s being more agile and successful in technology or marketing. In other cases, it’s It’s part of an effort to develop self-sufficiency, and China is increasingly backing well-funded national champions,” he said.

But the end and new twist in US-China business relations is that more and more American companies seeking technological superiority can find partners in China.

“When you look back 20 or 30 years since American companies entered the market, they got partners because they had no choice. We are looking for joint venture partners with complementary capabilities, including technology and marketing capabilities,” Stein said. “While just a few years ago technology licensing was almost exclusively one-way, we are seeing it increasingly becoming two-way.”

“Talking to our members, we see how revenues from China fund research and development that helps American companies maintain their edge and stay competitive. Competing in the fastest growing markets in the world, we see the intense competition they face helping them gain economies of scale and remain competitive globally. “And it’s hard to imagine how a company could be successful globally if it weren’t active in this market.”

The 4th The US-China Business Forum was hosted by Forbes China, the Chinese version of Forbes. The rally was held in person for the first time since 2019. 2020 and his 2021 he was held online at the height of the Covid 19 pandemic.

Other speakers included Chinese Ambassador to the United States Qin Gang. Wei Hu, General Chamber of Commerce of China – President of the United States. James Shih, SEMCORP Vice President. Abbey Lee, Director of Corporate Communications and Research, General Chamber of Commerce of China. Audrey Lee, Managing Director of BYD America. Lu Kao, Managing Director of Global Corporate Bank, Corporate & Investment Bank, JP Morgan.

Stephen A. Orleans, Chairman of the National Committee on U.S.-China Relations, also spoke. Ken Jarrett, senior his advisor at Albright Stonebridge Group; Dr. Bob Li, Memorial Sloan Kettering Cancer Center, Physician Ambassador for China and Asia Pacific. Yue Sai Kang, Co-Chair, China Institute.

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