US companies slow investment in China

A vendor waits for customers at a vegetable wholesale market in Hefei, Anhui province: China’s economic slowdown is delaying investment in the country. photograph: reuters

A vendor waits for customers at a vegetable wholesale market in Hefei, Anhui province: China’s economic slowdown is delaying investment in the country. photograph: reuters

Tue, Apr 29, 2014, 01:05

Problems with accessing the Chinese market and slower economic growth means US firms are planning to invest less in China, the American Chamber of Commerce in China said in its annual report on the business climate.

“We refer to market access barriers as one of the primary reasons for lowered investment,” Chamber chairman Greg Gilligan said at the launch of the report. He pointed our four key areas: investment, intellectual property rights, transparency and engagement, and standards.

“With slower growth, we see more challenges. Our member companies do not reflect less need for investment, but perhaps less need for investment based on the old economic model that was more reliant on exports and infrastructure spending,” Gilligan said.

With slower growth, the model was changing. AmCham members perhaps had less need for investment based on the old economic model that relied more on exports and infrastructure spending and are looking to increase investment in those areas where implementation can happen in the best possible way.

China’s economy expanded 7.4 per cent year-on-year in the January-March quarter, its slowest pace in 18 months. US non-financial direct investment in China dropped 1.91 percent year-on-year to $1.04 billion (€750 million) in the same period, according to Ministry of Commerce data.

Gilligan said state-owned enterprises have increased their control over certain sectors of the economy in recent years, and a big negative for AmCham members was government support for SOEs, Gilligan said.

Reform plans

Gilligan said the government’s reform plans, as outlined by President Xi Jinping, would have similar impact to China’s joining the World Trade Organisation in 2001, if they were followed through.

Reforms would open much broader opportunities for both Chinese and American firms.

“The reform agenda is extremely encouraging, although there’s a little bit of a wait-and-see attitude because the implementation of the reform agenda will be decisive on how much progress we all can make together and in what period of time,” he said.

The traditional concerns were also there, such as issues about government procurement and protection of intellectual property rights. The members also voiced concerns about negative reactions if they tried to defend themselves in the Chinese courts.

On the plus said, AmCham members were upbeat on the prospects for negotiations on a bilateral investment treaty between the world’s two biggest economies.