CHINA TOPIX

11/21/2024 10:19:06 pm

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U.S. Firms Report Unfriendly Chinese Investment Regulations

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(Photo : REUTERS/David Gray) Foreign law firms face tough pressure to succeed in China. Photo shows Beijing's Central Business District (CBD).

China was once considered a region with boundless potential for foreign investment. However, as it continues to grow and expand as one of the world's major economies, foreign firms are starting to experience difficulty maneuvering within its business sector.

From January to May 2014, U.S. investments in China declined to 9.3 percent compared to last year.

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Aside from the continued growth of local firms and increasing labor costs, foreign firms cite that the government's seemingly unfriendly regulations for foreign investment as one of the major problems they are faced with.

It should also be noted that foreign companies report difficulty in recruiting expats because of Beijing's air pollution problem.

"Perhaps the golden age for multinationals in China is over," said BDA investment firm advisory chairman Duncan Clark.

While some business sectors are still fruitful for foreign investments - like the movie industry and the consumer and financial services sector - Western companies grow increasingly frustrated because of the strict regulations imposed on them.

For instance, the Chinese oil and telecommunications industry is almost impossible to penetrate due to the domination of state-run companies that are usually given more leeway and relaxed regulations such as increased funding with lower loan rates, according to The Washington Post.

According to the U.S.-China Business Council, at least 100 sectors - such as in agriculture, health services and petrochemicals - are restricted to domestic investment.

Government procurement, a market estimated to be worth around $1.3 trillion, is mostly reserved for local businesses.

Trade groups also say that there has been little progress with President Xi Jinping's promised reform for the market to have a greater role in the allocation of resources.

"There is uncertainty about policy direction, and that is something China needs to be aware of," said U.S.-China Business Council president John Frisbie.

Meanwhile, business leaders urge the U.S. government to work with China in developing a joint investment treaty that would eliminate foreign investment barriers in Beijing.

Although China is still ranked within the top three investment destinations, it no longer holds top rank as it did in previous years, according to a survey by the U.S.-China Business Council and the American Chamber of Commerce-China.

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