Foreign firms seek action from China’s new leaders

BEIJING - The Associated Press

China’s government has said this week it will unveil new measures to further liberalize interest rate and exchange rate markets this year. REUTERS photo

Foreign companies in China say they want the country’s new leadership to act on pledges to reduce bureaucracy and remove investment barriers as the business climate gets tougher, the American Chamber of Commerce in China said March 29.

Results of a survey of 325 businesses conducted by the chamber show just 28 percent see China’s investment environment improving, down from 43 percent a year earlier.

Although 78 percent were optimistic about business in China over the next two years, only 18 percent said they planned to substantially expand their investments in the coming 12 months, down from one-third in the year before.

Slower economic growth, market barriers and government restrictions were the main reasons for the more modest investment plans, while rising labor costs were also a concern, according to the survey conducted in November and December of last year. Foreign companies have had to contend with double-digit percentage growth in salaries and benefits for their workers over the past two years, while the cost of land and raw materials have also shot up.

Chamber President Christian Murck said companies were encouraged by recent statements from leaders such as Premier Li Keqiang’s pledge to reduce the number of approvals needed for investments by one-third, but that real action is now needed.

Business gets tougher

“Overall, it’s a hopeful time despite the challenges. We have a new leadership, we have an economy that is performing pretty well,” Murck said. “We all feel that there is a very broad understanding of the issues at the senior levels of the Chinese government, and we are hopeful that we will begin to see a more direct focus on action.”

Doing business in China has grown tougher with economic growth in the world’s second largest economy slowing from the torrential pace of past decades to 7.6 percent in 2012, the lowest level in three years. However, opportunities remain strong for the 71 percent of companies surveyed who are targeting the Chinese domestic market directly and annual foreign direct investment continues to top $100 billion.