China market access more critical to US firms

US firms working in China are more concerned about regulatory and policy issues than about pushing China to revalue its currency, the head of the American Chamber of Commerce said in Beijing recently. American businesses are encountering new obstacles to market access as China’s growing economy leads them to expand deeper into inland provinces, AmCham […]

 

US firms working in China are more concerned about regulatory and policy issues than about pushing China to revalue its currency, the head of the American Chamber of Commerce said in Beijing recently.

American businesses are encountering new obstacles to market access as China’s growing economy leads them to expand deeper into inland provinces, AmCham president Christian Murck told reporters.

Washington has been pressing China to allow its currency to appreciate and trade more flexibly, with politicians and labour groups blaming the undervalued yuan for the large US trade deficit with China and the loss of US manufacturing jobs.

“A singleminded focus on the yuan is a mistake,” Murck said, citing access for financial services, progress toward a market economy and domestic industrial policies as important concerns for US business operating in China.

Policy makers in Beijing worry that allowing too much of an appreciation in the yuan will make Chinese exports uncompetitive, hurting a sector that drives growth and jobs in China.

Half of member companies surveyed by AmCham said a Chinese economic slowdown ranked as one of the top three risks in upcoming years, while 30 percent cited rising labour costs in China, AmCham said in its annual white paper.

Some 15 percent viewed yuan appreciation as a risk.

Foreign investors have previously experienced steadily widening opportunity and market access in China, especially as China joined the World Trade Organisation and opened new sectors to investment and competition.

That trend is now bumping up against inconsistent applications of regulations, concerns over registering and protecting intellectual property and indigenous innovation rules.

“Now, when we look from the vantage point of 2009 and 2010, and look toward the future, we feel less certainty that trend will continue,” Murck said.

China’s measures to stave off the global economic crisis by channelling stimulus funding through state banks to state-backed sectors has contributed to foreign firms’ perceptions of increased obstacles.

“That represents a slowing in the processs of moving forward to a market economy,” he said.

American corporations have been increasingly reliant on returns from their businesses in China, as other markets continue to feel the effects of the global financial crisis.

Many firms are selling into second- and third-tier cities, or moving operations from the prosperous coast to inland regions where labour is cheaper but logistics are less developed.

That accounts for part of the increased concerns over regulatory issues, as firms contend with different applications of rules and local favouritism, Murck said.