AmCham Shanghai - 2017 Business Confidence Survey Summary

Dear CBI Members & Partners,

Please find details of AMCHAM Shanghai's recent 2017 Business Confidence Survey. Executive Summary and Headlines follow with a hot link to the Report further down. Many thanks.

Executive Summary

• Halfway through 2017, American companies are reporting an improved market environment for their goods and services, but a difficult policy environment that poses long-term challenges to the success of U.S. companies.
• Policy Environment: Significant concerns about market access, industrial policies and basic fairness persist. Most survey takers (56%) believe Chinese government policy still favors local companies over foreign companies. By industry, healthcare and hospital services (88%) felt this most acutely. By sector, retail was most impacted (73%).
• Most respondents believe Chinese government policies toward foreign companies have remained the same (40%) or worsened (33%). Only 28% see improvement.
• Five-year optimism levels were flat at 80%, or 10% below levels seen several years ago. This reflects continuing concern about China’s unclear regulatory policy, the lack of meaningful economic reform, growing domestic competition and slower growth.
• Investment: The number of companies reporting China as their number one global investment priority dropped 5.4% to 23.6%. One in five companies is redirecting investment to other locations, with Southeast Asia the top destination.
• 55% of companies increased their investment in 2016, lower than the levels observed two to three years ago of about 64-65%, and 74% in the 2013 survey.
• Business performance: Performance metrics for most companies improved in 2016, reflecting the government’s mid-year stimulus, which helped recharge the economy in late 2016.
• 73.5% of companies reported revenue growth in 2016, recovering from the 61% recorded in 2015. Retail and services performed better than manufacturing.
• More companies were profitable (77% vs 71% in 2015), led by the non-consumer electronics and pharmaceutical/medical devices/life sciences industries.
• Challenges: 60% reported that China’s regulatory environment lacks transparency. Lack of IPR protection and enforcement (64%), obtaining required licenses (63%), and data security and protection of commercial secrets (58%), were top regulatory hindrances to business success.
• The top three operational challenges was a familiar list: rising costs (93%), domestic competition (82%), and lack of talent and capabilities (78%). Seventy-nine percent of respondents reported increased competition from private Chinese companies.
• Policy response: 40% believed the U.S. government should use investment reciprocity as a tool to gain greater market access in China for U.S. companies.
• Our members ranked the pursuit of multilateral free trade agreements (32%) and stronger advocacy for a level playing field (27%) as the top trade priorities for the U.S. administration. Sixty-five percent said the Trump administration has had no impact on China investment plans.
• The improved results for U.S. companies reflected in this survey will not last unless China adopts significant reforms to eliminate market barriers, level the playing field, and provide a transparent and stable regulatory framework.

https://www.amcham-shanghai.org/sites/default/files/2017-07/2017%20China%20Business%20Report.pdf