China losing attraction for American firms

April 25, 2019 11:30
As Sino-US trade talks continue, the hawks within the White House are calling for tariffs on some goods to be maintained to ensure that Beijing implements the terms of an agreement. Photo: Bloomberg

As the Sino-US conflict spreads from trade to telecoms and academia, US investors in China are trapped in the middle. The country is losing its attraction for them.

“Foreign companies have seen their prospects in certain industries narrowed because of China’s own goals for Chinese companies to take a certain market share in domestic markets,” said Tim Stratford, chairman of the American Chamber of Commerce (AmCham) in China. “They have felt less enthusiastic about the opportunity to invest here.”

Last week AmCham set out its concern in a white paper on the business climate in China.

“Our member companies continue to face an uncertain operating environment in China,” it said. “As the US-China trade negotiations continue, other tensions in the bilateral relationship intensify and many of our long-standing concerns about the business environment in China remain unaddressed.

“The number one challenge for AmCham members is inconsistent or unclear regulations and uneven enforcement,” it said.

AmCham called for national treatment for all companies – domestic and foreign, public and private. “Enacting a policy of ‘competitive neutrality' is especially important given the increasing scrutiny facing the US-China commercial relationship and the questions being raised internationally about the greater market access enjoyed by Chinese companies overseas compared to the access foreign-invested enterprises have in China.

“AmCham strongly believes that, to realize its innovation goals, China should open its digital as well as its physical doors to allow information to flow more freely across borders,” the group said.

Previously, AmCham and other US investors were strong advocates for China in Washington. But they are losing the appetite for this, said Stratford.

“[China] does not look as promising an opportunity as it did in the past and, therefore, they naturally felt less enthusiastic about working hard to try to advocate on some issues related to the US-China relationship,” he said.

Beijing and Washington have held numerous rounds of talks in an attempt to reach a trade agreement. In December, Washington held off on raising tariffs on Chinese imports it had imposed. Initially, the talks were to last three months but have now been extended.

US firms in China support many of the objectives of the White House negotiating team. Stratford called the talks “the most extensive and most valiant” between the two sides over the past 20 years. The most important thing, he said, is not meeting some paper deadline.

“It is making sure that the final deal is a really good deal that will hold together. It is important that there be some consequence, so that this agreement is different from agreements that did not really change what was happening on the ground.”

US firms in China are on the frontline for retaliation if there is no agreement or if Beijing chooses to react to the fierce anti-China rhetoric of US leaders, the exclusion of Huawei from its telecom market and the treatment of some of its academics in the US.

For their future, the firms rely on the access of their products and services to the US and Chinese markets and fear that tariffs on some goods will continue even after the signing of an agreement.

On Monday, top US business groups warned President Donald Trump against retaining such tariffs. Representatives of US retailers, oil producers, fisheries and software companies called for the “full and immediate removal" of all added tariffs on Chinese goods in a deal, saying that anything less would be “a loss for the American people”.

“The administration must avoid any enforcement mechanism that would trigger future tariffs and result in long-term economic uncertainty,” the groups said.

The hawks within the White House, including US Trade Representative Robert Lighthizer, are calling for tariffs on some goods to be maintained to ensure that Beijing implements the terms of an agreement.

Another bad omen for US firms is “Made in China 2025”, which calls for national champions, state-owned, in fields of advanced manufacturing. It sets targets and funding levels for state firms only.

Because of opposition from the US and other developed countries, Beijing is now playing down the 2025 plan. But it remains a national policy.

“AmCham China members remain concerned that previous MIC 2025 policies will continue to be used to support domestic companies at the expensive of foreign-invested enterprises,” the white paper said.

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A Hong Kong-based writer, teacher and speaker.