Key Takeaways from the 26th Annual American Business in China White Paper, the AmCham China Quarterly Magazine, Issue 2, 2024.
The 2024 AmCham China American Business in China White Paper (White Paper) represents a culmination of insights gathered from our diverse membership covering a range of topics including industry-specific issues, industrial policy, market access, and regional dynamics across China. This comprehensive report, developed in collaboration with member company representatives, has served as a vital resource for stakeholders, policymakers, and business leaders navigating the complexities of US-China economic relations for the past 26 years. In this feature, the AmCham China Quarterly explores some key insights from the 2024 White Paper.
Now in its 26th year of publication, the 2024 AmCham China American Business in China White Paper (White Paper) remains an invaluable resource for US-China business leaders, policymakers, and governments on both sides. Featuring over 30 chapters, including more than 20 that address industry-specific issues, 10 chapters focused on industrial policy and market access, and five chapters exploring region-specific issues in central China, northeast China, southwest China, Shanghai, and Tianjin, the White Paper comprehensively examines the multifaceted challenges and opportunities encountered by AmCham China’s member companies throughout 2023 and early 2024. Developed in collaboration with member company representatives, the White Paper offers an accurate and comprehensive snapshot of the business environment in China, reflecting the latest developments and insights.
In the ever-evolving landscape of international business, few bilateral relationships carry as much weight and complexity as that between the United States and China. For American companies operating in China, understanding and adapting to this dynamic environment is not just crucial for success but also for navigating the myriad challenges that define the US-China economic relationship.
AmCham China’s 2024 White Paper provides a comprehensive overview of the current business climate and sheds light on the perspectives and challenges faced by its member organizations. The report highlights both the opportunities and the obstacles encountered by American businesses in China, offering valuable insights into the state of US-China relations from a commercial standpoint.
Economic Opportunities Amidst Political Tensions
In 2023, the foreign business community welcomed the last tranche of COVID-19 control measures and the resumption of high-level talks and visits between the US and Chinese resumed. Nevertheless, despite these many positive developments, the Chamber’s 2024 Business Climate Survey (BCS) revealed that members cited “Rising tension in the US-China relationship” as their top challenge for the fourth consecutive year. Going forward, both nations will look to safeguard their national security interests while advocating for economic engagement that promotes mutual prosperity. However, Chamber members has emphasized the importance of maintaining open channels for dialogue and cooperation, urging policymakers on both sides to balance security concerns with the need for a conducive business environment.
Challenges and Realities of Doing Business in China
The 2024 White Paper delves into the nuanced realities faced by American businesses operating in China. Despite China’s efforts to enhance the foreign investment environment through policies like the “New 24 Measures,” actual experiences reveal a more cautious sentiment among investors.
For example, even though there has been talk of creating a more welcoming environment for international investors, foreign businesses have well-founded reasons for skepticism based on history. The increase in foreign businesses’ direct investment into China in 2023 was modest, marking its slowest pace since the early 1990s. The inconsistency in policy over time and the discrepancy between stated policies and their implementation has led to a cautious approach among investors. Foreign investors are finding that the anticipated economic reforms and efforts to liberalize are unfolding at a slow pace, which has tempered enthusiasm and confidence over the prospects of the Chinese market for foreign investment.
Concern over the sustainability of foreign investment and broader economic reforms also affects the enthusiasm of our members to invest in China. They have seen how abrupt changes in policy or in the regional security environment can impact economic prospects and the security of investments, and naturally have concerns about their medium-to-long term prospects in China as well.
To US government policymakers, we welcome the opportunity to work closely with policymakers and are pleased to offer a comprehensive overview of the present circumstances and operational realities faced by US companies in China. We will continue to pinpoint and convey fair and durable opportunities to our member organizations.
Building Trust and Cooperation
Trust is a fundamental element of successful trade relationships. Cultural exchanges often involve shared experiences, joint projects, and educational programs that build personal and institutional trust. The US-China Sister Cities program, which pairs cities from the United States with cities in China, fosters cultural and economic ties.
People exchange between the US and China has become more frequent after the “Sunny Land” dialogue. Hewlett Packard Enterprise (HPE) played a crucial role in strengthening these ties by collaborating with public sectors, private sectors, and NGOs. HPE welcomed the Shanghai Government Delegation to The HP Garage, the birthplace of Silicon Valley in California, to celebrate the 45th anniversary of the San Francisco-Shanghai Sister City relationship in May 2024. Additionally, HPE hosted the Dalian Government Delegation at their Customer Innovation Center in Houston during Cera Week in March 2024. This renewed collaboration underscored the importance of building trust and fostering cooperation, setting a positive tone for future partnerships in trade, investment, and innovation across cities.
Technology and Financial Controls: Balancing Innovation and Security
The intensifying competition over technological supremacy has also shaped US-China relations in recent years. Both countries have implemented stringent measures to safeguard sensitive technologies and mitigate risks associated with dual-use applications. The imposition of export controls on entities involved in military-related activities underscores the growing concerns over technology transfer and national security.
Moreover, financial investments have come under scrutiny, with regulatory measures aimed at preventing US capital from inadvertently bolstering China’s military capabilities. This regulatory landscape underscores the intricate challenges faced by American investors navigating China’s market, where economic opportunities are intertwined with geopolitical considerations.
Policy Recommendations and Outlook
Policy Priorities for 2024
Priority One: Encourage High-Level Communication and Dialogue to Foster Mutual Understanding
Background:
“Rising tensions in US-China relations” is the top business challenge for American organizations in China, with 54% of survey respondents considering positive bilateral relations crucial for business growth.
COVID-19 stalled high-level communication, contributing to misunderstandings and tensions.
Trade and investment are vital for the global competitiveness of US companies operating in China.
AmCham China is ready to communicate the opportunities and challenges of operating in China to policymakers.
AmCham China Recommends:
Frequent high-level communication between the US and China through consultative working groups and forums.
Separating economic concerns from national security issues, limiting export and investment controls to allow for mutual prosperity.
Supporting citizens in reestablishing bilateral ties through tourism, education, and business platforms, and securing multiple high-level bilateral forums in 2024.
Priority Two: Strive for Consistent and Clear Policymaking and Implementation to Support Investment Decisions
Background:
AmCham China seeks updated business-oriented policy reforms, equal treatment for all enterprises, and transparency in government-supported subsidies.
Opaque policymaking in China diminishes business confidence and hampers informed investment decisions.
Multinational corporations need flexible data transfer regulations; excessive regulations hinder business confidence and operations.
AmCham China Recommends:
Implementing transparent and practical economic policies treating domestic and foreign entities equally.
Clarifying and narrowing the bounds of the new Anti-Espionage Law to not impede business operations.
Adopting a less burdensome approach to cross-border data transfer requirements, as encouraged by the recent regulations on cross-border data flows.
Priority Three: Build Efficient and Equal Market Access to Sustain the Commitment of Foreign-Invested Enterprises (FIEs) to the Chinese Market
Background:
39% of survey respondents are unsure about the Chinese government’s commitment to opening its market to foreign investment, signaling a lack of confidence.
US companies aim to promote their businesses and invest long-term. Greater information transparency would aid prudent and timely investments.
Despite the Chinese government’s stated encouragement of foreign direct investment, members face barriers, discrimination, and suspicion.
AmCham China Recommends:
Reducing biased scrutiny of foreign business operations, less interference in corporate due diligence, and halting arbitrary import controls on non-sensitive goods.
Ensuring consistent implementation of national policy at provincial and local levels, greater access to government procurement, and narrowing cross-border data transfer restrictions
Looking ahead, AmCham China emphasizes the importance of sustained dialogue and collaboration between US and Chinese policymakers to address mutual concerns and foster a more predictable business environment. The White Paper outlines key policy priorities aimed at enhancing transparency, regulatory clarity, and market access for American companies in China.
AmCham China advocates for continued efforts to promote fair competition and equitable treatment of foreign businesses in China’s market. It calls for reforms that uphold international standards of governance and protect intellectual property rights, essential for fostering long-term confidence and sustainability in bilateral economic relations.
AmCham China’s 2024 White Paper serves as a critical resource for policymakers, stakeholders, and businesses navigating the complexities of US-China relations. By providing a comprehensive analysis of the economic landscape and articulating the challenges and opportunities facing American companies in China, the report underscores the importance of dialogue, transparency, and strategic engagement in building a resilient and mutually beneficial bilateral relationship.
As uncertainties persist and geopolitical dynamics evolve, maintaining open channels for dialogue and cooperation remains essential. AmCham China remains committed to advocating for the interests of its member organizations, contributing to the advancement of US-China relations through constructive engagement and shared prosperity.
All AmCham China card-holding members should have received an email with a link to download the 2024 White Paper. All non-members are welcome to buy the publication, please visit our website to learn how to purchase.