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US Businesses Concerned about Investment Restrictions, IP Rights in China

The head of a coalition of American businesses operating in China says investment restrictions and concerns over intellectual property rights are key issues for companies doing business there.

When John Frisbie, president of the U.S.-China Business Council, accompanied more than a dozen top American CEOs to China earlier this month, Chinese restrictions on foreign investment was a major issue for both sides. "I think the investment area is one that is highly important for both economies and that reducing investment barriers, again there's a lot on their side; there's probably some things that could be done here, reducing investment barriers would probably help both economies because more direct investment creates jobs. No doubt about it," he said.

Speaking with reporters here in Washington this week, Frisbie said its time for China to begin addressing this problem and reduce investment restrictions. "China has a pretty extensive list of industry sectors or particular product areas where foreign investors are limited to having to do a joint venture with a Chinese partner or even in some cases hold a minority share in a joint venture with a Chinese partner," he said.

Under such arrangements, U.S. companies worry that they will be forced to transfer technology and sensitive information to their Chinese partners.

Frisbie says that in addition to investment, intellectual property rights and equal treatment were among other key issues American business leaders urged China to address.

He says that although U.S. companies say a nine-month anti-piracy campaign launched by Beijing late last year was helpful, a permanent and tougher effort is needed. "Basically, adopt the international standard on criminal penalties as a tougher deterrent, criminal penalties in cases of commercial scale. China hasn't done that yet," he said.

American business leaders say they hope to see substantive progress on these and other issues when U.S. and Chinese officials hold their latest round of U.S.-China Joint Commission on Commerce and Trade talks in Chengdu, China next week.

The U.S.-China Business Council has more than 200 members, and includes major American corporations as well as smaller businesses such as law firms and consultants. According to a recent survey of its members, foreign investment restrictions and intellectual property rights were among the top 10 concerns of U.S. businesses in China.

John Frisbie says that although some of the challenges American companies face involve Chinese government policies, others are not. "Pretty consistently, the top issue is HR [human resources], the ability to hire people in the environment and keep them, where there're a lot of companies, including Chinese companies chasing the same talent, the turnover pressures that creates for companies the comp [compensation] and ben [benefits] pressures that creates for companies. If you're trying to run a business in China, that's probably your top headache," he said.

Another issue that limits a company's ability to expand in China, Frisbie says, is the myriad of licenses businesses need and the problems they face in receiving those licenses in a fair and timely manner.

He says the rising cost of labor, materials, land, utilities and taxes are also among the biggest concerns for American companies doing business there. "Each year, we ask companies to rate how any particular issue has faired over the last 12 months; you know, better, worse the same. The one that was at the top of the list for deterioration over the past year was cost increases. It is getting more expensive to do business in China," he said.

But rising costs, Frisbie adds, affects companies in different ways. Firms that use China as a low-cost manufacturing base might move their operations elsewhere. Companies whose sole focus is the Chinese market will likely stay.

But according to the U.S.-China Business Council, most of its members saw double-digit revenue growth in China last year.