BEIJING -
Intellectual property rights and power shortages
are problems in both Shanghai and Beijing but the
outlook for business in both cities remains
overwhelmingly positive, says the "White Paper
2005 American Business in China" released
September 1.
The white paper, the seventh
annual report of its kind, was jointly prepared by
the American Chamber of Commerce in China (AmCham)
and the American Chamber of Commerce in Shanghai,
and outlined the current state of business for a
number of industries, ranging from manufacturing,
trade and distribution to services. Released
annually, the paper is the result of surveys and
consultation among nearly 2000 member businesses
of both chambers.
City-specific
challenges for Beijing, Shanghai It also
points out a number of city-specific challenges
faced by Beijing and Shanghai as they develop a
more international business environment. Despite
growing government attention,
intellectual property rights
protection remains a prominent problem in both
cities. While progress has been made, AmCham says
the lack of protection is forcing business to
reconsider plans in both Shanghai and Beijing. A
lack of enforcement by local governments was cited
as a major issue.
Energy supply is also a
concern. Both cities faced shortages this summer
and had to "borrow" power from neighboring areas.
The stop-gap measure kept both cities operating,
but long-term solutions are needed, says AmCham.
Still, said James Green, AmCham Shanghai's
director of government relations, the biggest
challenge is human resources. "Finding, training
and keeping management," Green said. "It's a hot,
hot labor market and people are in high demand."
In Beijing, said AmCham, there has been
progress in reducing red tape for businesses and
transparency is better. There is, however, an
acute lack of water and growing traffic woes that
may hamper the city's ability to meet long-term
goals. Air quality in the city is also a problem.
The number of airborne particles rose last year
and, the report points out, the Chinese Academy of
Social Sciences ranked Beijing 14th among China's
cities on that count.
Shanghai businesses
tended to focus on the practical side of business
and lifestyle. A stable supply of electricity was
a concern alongside slow Internet connections,
which make it difficult to do business online. One
concern, which affects Beijing as well, is a lack
of regulations for distribution companies: "...
lack of progress on distribution rights is
especially noteworthy in Shanghai."
As in
Beijing, intellectual property rights are a
concern but they may have a more direct impact in
a city looking to attract high technology
businesses to its 140 foreign-invested research
and development centers. Many companies don't
expand beyond a representative office "for fear of
losing proprietary information and technology."
Other concerns for Shanghai businesses
included daily-life issues. Health care was a top
concern, as was traffic safety. Education for
expatriates also posed a challenge: businesses
said their employees had trouble finding spots in
accredited foreign schools at reasonable fees.
Ultimately, however, the outlook is positive, said
AmCham Shanghai chairman Jeffrey Bernstein.
US firms upbeat A huge majority
of US businesses operating in China reported
increases in annual revenues last year, according
to the white paper. About 86% of respondents said
they posted higher revenues in 2004 compared to
the previous year; and 68% were "profitable" or
"very profitable" last year.
The
nationwide survey also showed that US companies
had great confidence in China's business
environment. "The vast majority of survey
respondents, 93%, report that China's economic
reforms have improved the climate for US
businesses, and 92% said their five-year business
outlook in China is 'optimistic' or 'cautiously
optimistic'," the white paper said.
At the
same time, US businesses are facing increasing
competition from both local companies and foreign
rivals. Profitability in 2004 was slightly lower
that in the previous two years, indicating more
challenges. "We attribute the leveling margin to
both improved markets elsewhere and to US firms'
financial performance in China more closely
tracking their global performance as China
revenues grow," the white paper said.
It
explained that factors such as price pressure from
major customers, as well as changes in market and
commodity prices, and salaries, are driving down
margins. But the white paper added this was minor
compared to the continuity of higher profitability
since China joined the World Trade Organization.
Despite increasing challenges, most US companies
said they would increase business activities in
China.
Emory Williams, chairman of AmCham
China, said the annual white paper made
suggestions not only to the Chinese government but
also to the US administration. For example, he
said, the US government should relax restrictions
on issuing visas to Chinese. According to the
chamber's survey, visas issued to Chinese
nationals were up 23% compared to the previous
year, but still lower that the level before
September 11, 2001.
