Top-level managers at some 500 American companies in China say that although their businesses are turning a profit, they increasingly feel unwelcome and targeted for scrutiny by the Beijing government.
According to the results of the American Chamber of Commerce’s 2015 China Business Climate Survey Report, 57 percent say they feel Chinese regulators are focusing on investigating foreign firms.
The survey also found that 47 percent feel unwelcome doing business here. That was up from 44 percent last year.
Despite that sentiment, more than 70 percent say their businesses in China remain “profitable” or “very profitable.”
Since President Xi Jinping rose to power, investigation into foreign firms has become almost commonplace.
China has launched a massive drive to break up monopolies, improve food safety and clean up corruption. Last year, foreign firms including Microsoft, Qualcomm, Audi, McDonald’s and others found themselves in the government’s cross hairs.
But AmCham China Chairman James Zimmerman said he does not believe the government is deliberately targeting foreign firms.
“The campaigns that are supposedly targeted against foreign companies… is part of that natural progression of the law drafting and the law implementation,” Zimmerman said.
AmCham China represents more than 1,000 U.S. businesses and meets frequently with U.S. and Chinese officials to address the concerns of its members. Zimmerman has been working on China-related trade and legal issues for more than two decades. He said the reason why AmCham China has not spoken out more about concerns that firms are being targeted is because the group has been a part of China's law-building effort for 35 years.
He said he was personally involved in drafting China's Anti-Monopoly Law going back nearly two decades, and because of that, he said, "we know the government is in the process of getting that legal foundation in place."
Zimmerman added that he remains concerned about Chamber of Commerce members getting caught up in that evolving Chinese process, but is convinced there is not a broad campaign against foreign businesses in China.
“It is not necessarily a targeted campaign where you have Chinese officials sitting around drinking tea and smoking and deciding ‘Hey! Let’s go after foreign companies,’” he said.
Zimmerman thinks what is happening now is part of a longer process in China of implementing new rules, such as its anti-monopoly law which went into effect in 2008, and learning how to enforce those regulations.
He also said that many of the cases have not been brought up first by the Chinese government.
“The cases against foreign companies were really driven by whistle blowers internally, not by something that the Chinese government thinks up,” Zimmerman said. “Same thing with food safety, the case involving the company in Shanghai was really driven by media reports, not by the government, not by a campaign that they started.”
He said such things come up for a variety of reasons, including consumers and the media complaining, and when that happens, the government feels it needs to take action.
The landscape of China’s business environment has long been difficult to navigate, with the playing field tilted heavily in favor of state-owned firms. The country has seen tremendous changes since it began its shift from a state planned economy towards a more market driven one. But the state still plays a dominating role in business.
The government is trying to change that and has launched a massive reform campaign to try to open up its markets and give foreign firms more access. Those efforts are good news for foreign companies, but even so, nearly half of those surveyed say they feel unwelcome here.
“It is hard to pin down the real reasons for that. It is a very subjective question. And it could be driven by the media, an issue that is affecting a specific company, or a separate industry," Zimmerman said.
The sentiment of feeling less welcome this year than the previous was strongest among those in the research and development industries and those in the resources and industrial sector.
Companies in those sectors complain of being unfairly targeted by law enforcement and of having to compete against local firms that enjoy government funding.
The survey also saw 83 percent of respondents voice concerns about the impact of Internet censorship on their ability to do business in China.
Zimmerman said that companies are mainly concerned about how the censorship affects the flow of information, such as communicating with people overseas or buying products online.
Those are things that affect everyone, he said.
“Those are things that affect me that I find from time to time, but it seems to be more of an issue over the last six months where the Internet has slowed down or blocked in access to basic information and has impacted on what I can do in my business,” Zimmerman said.
He added that Internet censorship affects some businesses worse than others, but services industries that rely heavily on information are among the most severely hit.
As China’s growth slows and the outlook for the global economy is full of uncertainties, a growing number of companies say they do not plan to increase investment here.
The feeling that they are being targeted is also having an impact on investment plans as well.
According to the survey, the percentage of companies that see China as one of many destinations for investment and not their top priority for investment continues to grow.
The poll found that in 2010, 12 percent of companies surveyed said they saw China as one of many destinations for investment. That number grew to 27 percent this year, compared to 19 percent who say China is their top investment destination.