China - Market Challenges China-Market Challenges
Day to day business operations present a variety of obstacles. The World Bank in its Ease of Doing Business Report ranks China 78th out of 190 countries with respect to opening and running a business while complying with local regulations. For starting a business, the World Bank ranked China 127th, reporting that starting a business requires at least 11 procedures in Shanghai and Beijing that average more than 30 days to complete. Despite significant Chinese government efforts to streamline bureaucracy and reduce red tape, foreign companies continue to complain about administrative procedures, especially with respect to registration and licensing.
China also continues to pursue industrial policies that seek to limit market access for imported goods, foreign manufacturers, and foreign services providers, while offering substantial government guidance, resources, and regulatory support to Chinese industries. The principal beneficiaries of these policies are state-owned enterprises, as well as other favored domestic companies attempting to move up the economic value chain. Provincial and local governments often have an ownership stake in private companies, which can result in government support.
Foreign enterprises report that Chinese government officials may condition approvals on a foreign enterprise’s agreement to transfer technology; conduct research and development in China; satisfy performance requirements relating to exportation or the use of local content; or make valuable, deal-specific commercial concessions.
An area of growing concern for the foreign business community in China in 2016 are numerous draft and final measures that would impose severe restrictions on a wide range of foreign information communication technology (ICT) products and services, which have an apparent long-term goal of replacing foreign ICT products and services with domestic competitors. Concerns centered on the requirement that ICT products and services used or procured in many sectors be “secure and controllable.”
Finally, while foreign firms overwhelmingly continue to report profitability in China, their margins are shrinking, reflecting increasing competition, rising costs, heightened regulatory impediments, a shrinking labor pool, and—in some sectors—overcapacity.
Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.