AmCham Shanghai released its annual business climate survey on July 12, 2017. The survey, which gives a mid-year snapshot of how U.S. companies are doing in China, was conducted from April 11 – May 7 and had responses from 426 companies. Some highlights of the report are given below: 

·        Halfway through 2017, American companies report an improved market environment for their goods and services, but a difficult policy environment poses long-term challenges to the success of U.S. companies.

·        Business performance metrics for most improved in 2016, reflecting the government’s mid-year stimulus, which helped recharge the economy in late 2016. Consumer spending/expanding middle class also factors.

·        Revenue growth:  73% had revenue growth in 2016, vs 61% in 2015. Retail (76%) and services (76%) performed better than manufacturing (71%), but manufacturing had strongest recovery (71% vs 54% in 2015). Retail actually slipped.

·        Profitability:  77% were profitable in 2016 vs 71% in 2015. Operating margins also up. At 55% after four years at 48%.

·        Investment:  Mixed picture but not as strong as 2016. 55% of companies increased investment 2016. Lower than levels in previous years (which were mainly in the 64-65% range). But some increase in those increasing investment by >15%.  34.5% in 2016 vs. 27% in previous survey.

·        Policy Environment:  Significant concerns regarding market access, industrial policies and basic fairness persist. Most (56%) believe Chinese government policy still favors local companies. Slight drop from 59% in previous survey. Most respondents believe Chinese government policies toward foreign companies have remained the same (40%) or worsened (33%). Only 28% see improvement. 

·        Regulatory Challenges:  60% say 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.

·        Operational Challenges:  Top three a familiar list: rising costs (93%), domestic competition (82%), and lack of talent and capabilities (78%). 79% reported increased competition from private Chinese companies.

·        Policy Response:  65% said the new Trump administration has had no impact on China investment plans. 40% believed USG should use investment reciprocity as a tool to gain greater market access in China for U.S. companies.