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Costs, IP protection top issues for U.S. firms in China-survey

Wed, 15 Feb 2012 03:56 GMT

Source: reuters // Reuters

By Kazunori Takada

SHANGHAI, Feb 15 (Reuters) - Rising costs, an uncertain regulatory environment and intellectual property rights violations are among top challenges U.S. companies face in China, a survey showed, highlighting the difficulties of doing business in the lucrative market.

The annual survey by the American Chamber of Commerce in Shanghai, which bills itself as the "voice of American business" in China, comes a day after U.S. President Barack Obama told Chinese leader-in-waiting Xi Jinping in a meeting that Beijing must play by the same trade rules as other major powers.

In a speech to the Chamber of Commerce in Washington on Tuesday, Xi stood his ground against U.S. complaints on trade imbalances and intellectual property rights (IPR), saying Beijing "has taken steps to address them."

But the AmCham Shanghai survey showed 69 percent of respondents felt that China's enforcement of IPR had either deteriorated or stayed the same over the past year. The reading was little changed from a similar survey last year.

"Strengthening IPR enforcement and protection is needed, especially in industries like healthcare in which IPR infringement is reported by companies as a significant business hindrance," it said.

China in 2010 launched a campaign against IPR violations, but the progress has been slow with copies of expensive brands of watches, bags and computer software widely available.

Operations in China are still profitable but fewer companies expect their sales to rise this year compared with a year ago, the survey, which was conducted on 315 U.S.-based companies operating in China, showed.

About 90 percent of the respondents in the AmCham Shanghai survey saw rising costs as a hindrance to their businesses while 71 percent said legal and regulatory environments had either deteriorated or was little changed since the previous year.

"China is a difficult place in which to do business, in part, because the country's legal framework is still in the process of being built," the survey said.

Even if the law is fully developed, the application and enforcement can be uneven, especially in areas outside so-called Tier 1 cities of Shanghai, Beijing and Guangzhou, it added.

A separate survey conducted by The Economist Intelligence Unit on multinational companies showed in December nearly half of the respondents were concerned that they would have to give up IPR in exchange for market access, while 46 percent said the regulatory environment would have a significant impact on their China strategy over the next five years.

In May, a survey by the European Union Chamber of Commerce showed a similar rise in corporate concern over IP protection. (Editing by Jacqueline Wong)