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Over the Great Wall: US Company Views & Challenges of Doing Business in China

Over the Great Wall: US Company Views & Challenges of Doing Business in China. Ryan Ong US-China Business Council “China Emerged—Rethinking Your Global Strategy” University of Kansas March 1, 2013. P rivate, non-government, non-partisan More than 220 member companies

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Over the Great Wall: US Company Views & Challenges of Doing Business in China

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  1. Over the Great Wall:US Company Views & Challengesof Doing Business in China Ryan Ong US-China Business Council “China Emerged—Rethinking Your Global Strategy” University of Kansas March 1, 2013

  2. Private, non-government, non-partisan More than 220 member companies Senior level board of directors About USCBC About the US-China Business Council The United States-China Business Council is the principal organization of US companies engaged in trade and investment in the People's Republic of China. • Founded in 1973 • HQ in Washington, with regional offices in Beijing, Shanghai • Role as an “honest broker”

  3. China’s Market Opportunities: US Exports to China US Exports to China (US$ billions) Source: US Department of Commerce, cited in US-China Business Council “China and the U.S. Economy: Advancing a Winning Agenda,” January 2013

  4. China’s Market Opportunities: Chinese Consumers China’s Growing Consumer Class (millions) Source: InterChina Consulting, cited in US-China Business Council “China and the U.S. Economy: Advancing a Winning Agenda,” January 2013

  5. Setting the Stage: China’s Economic and Political Environment in 2013

  6. China’s Economy in 2013 China 2013 GDP Growth Rate Projections • 2012 GDP grew at 7.8% – lower than 2011’s 9.3%... but higher than the March 2012 targeted rate of 7.5%. • 2013 predictions are higher… government target unknown but perhaps around 7.5%.

  7. China’s Leadership Transition China’s New Leadership Lineup Xi Jinping Li Keqiang Zhang Dejiang Yu Zhengsheng Liu Yunshan Wang Qishan Zhang Gaoli

  8. China’s Leadership Transition Timeline for China’s Political Transition National People’s Congress: New Government Leaders, Government Reorganization Party Congress: New Politburo, Party Leadership Remaining government changes Assorted changes in provincial governments, some ministries November December January February March April

  9. China’s Leadership Transition Increased domestic consumption Lower income disparities Balanced regional development Tax and financial system reform Current Policy Priorities Healthcare reform Broader social safety net Industrial & service sector modernization “Clean and green” economy Domestic priorities may – or may not – link to foreign concerns

  10. Trends to Watch: China’s 12th Five-Year Plans China’s 12th Five Year Plans (FYPs) • Broad, aspirational policy document, laying out policies/goals for the next five years (2011-2015) • Sets overall social/macro economic direction • Accompanied by a series of follow-up plans (nearly 300 and counting) • Takeaway: FYPs provide glimpses of government direction, policy goals, and potential opportunities

  11. Company Views of the Business Environment in China

  12. Company Views of the Business Environment in China USCBC 2012 Member Company Survey: Respondents Profile Company Experience in China Sector Location China United States Other 51% 40% 9% > 20 years 11 – 20 years 5 – 10 years < 5 years 53% 28% 12% 7% Manufacturing Services Ag/Resources Other 51% 40% 9% 15% Strong and Unique Mix of Respondents Source: US-China Business Council 2012 Member Company Survey

  13. Company Views of the Business Environment in China China's Prominence in Overall Company Strategy Source: US-China Business Council 2012 Member Company Survey

  14. Company Views of the Business Environment in China Objectives for Existing and Future Investments in China Source: US-China Business Council 2012 Member Company Survey

  15. Company Views of the Business Environment in China Are Your China Operations Profitable? Source: US-China Business Council 2012 Member Company Survey

  16. Company Views of the Business Environment in China Revenue from China Operations 2012 2011 2010 Source: US-China Business Council 2012 Member Company Survey

  17. Company Views of the Business Environment in China Five-Year Business Outlook for China Source: US-China Business Council 2012 Member Company Survey

  18. Top Company Concerns in Operating in China

  19. Top Operating Issues for US Companies USCBC 2012 Survey: Top 10 Challenges • Human resources: Talent recruitment and retention • Administrative licensing • Competition with Chinese enterprises • Cost increases • IPR: Enforcement • Uneven enforcement and implementation • Investment restrictions • Competition with foreign companies in China • Competition with companies not subject to FCPA • Standards & conformity assessment

  20. Top Operating Issues for US Companies: HR & Rising Costs Top Cost Concerns Source: US-China Business Council 2012 Member Company Survey

  21. Top Operating Issues for US Companies: Administrative Licensing Administrative Licensing • The Administrative “Black Box” • Bureaucratic delays • Lack of regulatory clarity • Inconsistent application of laws • and regulations • Conflicts between central & local priorities Project Approvals Business Licenses Checks/Investigations Regulatory Compliance

  22. Top Operating Issues for US Companies: Competition Competition with Chinese Companies • Chinese companies (SOEs, private) increasing market competitiveness over time, both in China and abroad… • …but foreign companies remain concerned that Chinese companies have access to better policies, incentives, and greater/better government access – both in China and abroad. • Access to credit and export promotion programs, government procurement projects, inside role in shaping and driving policy, etc.

  23. Top Operating Issues for US Companies: Intellectual Property Rights How does China’s level of IPR Enforcement limit the activities your company can do in China? Source: US-China Business Council 2012 Member Company Survey

  24. Top Operating Issues for US Companies: Protectionism Signs of Protectionism Administrative licensing Standards setting Discriminatory enforcement Subsidies Gov’t pressure to favor Chinese firms Gov’t procurement buy local M&A reviews/ approvals Adjudication in commercial courts Not seeing signs of protectionism Other Source: US-China Business Council 2012 Member Company Survey

  25. Trends to Watch: Strategic & Emerging Industries Strategic Emerging Industries

  26. Company Takeaways What do these trends mean for companies? • Tracking of policies and plans to position operations and anticipate challenges: short- and long-term • Reassessment of global and China operations to adapt to changing markets and operational challenges • Need for active engagement and relationship-building with governments and external stakeholders • Increased use of Chinese enforcement channels to protect company interests

  27. Thank you! Contact information: ryanong@uschina.org (202) 429-0340

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