About AmCham Shanghai
The American Chamber of Commerce in Shanghai (AmCham Shanghai),
known as the Voice of American Business in China, is one of the largest
American Chambers in the Asia Pacific region.Founded in 1915, AmCham
Shanghai was the third American Chamber established outside the United
States. As a non-profit, non-partisan business organization, AmCham
Shanghai is committed to the principles of free trade, open markets, private
enterprise and the unrestricted flow of information.
AmCham Shanghai’s mission is to enable the success of our members and
strengthen U.S.-China commercial ties through our role as a not-for-profit
service provider of high quality business resources and support, policy
advocacy, and relationship-building opportunities.
Find us online at amcham-shanghai
About PwC
At PwC, our purpose is to build trust in society and solve important problems.
We’re a network of firms in 158 countries with more than 236,000 people who
are committed to delivering quality in assurance, advisory and tax services.
Find out more and tell us what matters to you by visiting us at pwc.
PwC refers to the PwC network and/or one or more of its member firms, each
of which is a separate legal entity. Please see pwc/structure for
further details.
PwC Mainland China and Hong Kong Consulting Services is a leading consult-
ing practice focused on creating sustainable value and lasting change for our
clients, helping them address their most complex business issues from strategy
through execution. With dedicated consultants in Beijing, Shanghai, Hong
Kong, Guangzhou and Shenzhen, PwC Mainland China and Hong Kong
Consulting Services is part of a global network of firms and serves clients in a
variety of industry sectors across Mainland China and Hong Kong. For more
information, please visit our website pwccn/consulting (for Mainland
China), or pwchk/consulting (for Hong Kong).
AmCham Shanghai and PwC would like to thank all survey participants and
business executives who provided input for this report.
Report authors: Doug Strub, Ruoping Chen, Ian Driscoll
Contributors: Jason Wang, Jessie Niu, Qinly Wu, Julie Chien
Designer: Donegood Studio
Acknowledgements
CHAMBER MESSAGE
Welcome to The American Chamber of Commerce in Shanghai’s 2018 China
Business Report.
This report is based on the results of our annual China Business Climate Survey, one of the
longest running surveys of U.S. business in China that began in 1999. The report reflects the
views and insights of our member companies based on their considerable experience doing
business in this important market.
This year’s survey was conducted between April 10 and May 10, 2018, with responses from
434 companies. In understanding the survey results, it is important to keep in mind the political
backdrop at that time. The Trump Administration announced the results of its Section 301
investigation in March and the initial tranche of proposed tariff items was released in AprilAt
the time of the survey, the U.S. and Chinese governments were in discussions to avert the use
of tariffs, but as we go to print, it seems likely that tariffs in some form will become a reality.
The survey included questions designed to measure trends in company performance,
challenges and investment, as well as questions about trade policy, cybersecurity policy, trade
policy tools and Chinese industrial policies.
In this year’s report, companies show profitability in line with last year and marginally improved
revenue growth. Optimism about the five-year business outlook was flat, but companies
continue to invest despite the distraction of a year of U.S.-China trade frictions. Increasing
domestic consumption is seen as a positive trend by many industries, even while China’s
unnecessarily onerous data security laws have proven costly and opaque. Expansion outside
of Shanghai is impeded by a lack of talent, yet companies are still eagerly spreading their
footprints.
Despite the relative optimism our members feel guarded about the future. Government
procurement practices still favor local companies and may become even more entrenched as
Made in China 2025
and other policies institutionalize local-first purchasing. American
companies in strategically important business areas experience pressure to transfer
technology. These policies and practices are in turn stoking demand for reciprocity in the
U.S.-China trading relationship even if our members generally oppose the use of retaliatory
trade tariffs. Resolving these challenges in an equitable manner is essential for the United
States and China to have a healthy long-term commercial relationship that brings benefits to
both our peoples.
We are grateful to our survey partner, PwC, for their support, as well as to all the executives
who participated in this year’s survey and shared their thoughts.
Kenneth Jarrett
President
Eric Zheng
Chairman
EXECUTIVE SUMMARY
At the mid-point of 2018, member companies are reporting good financial performances and continue to
invest in China, across many industries. Regulatory barriers and persistent government favoritism toward
local companies continue to unfairly impede U.S. companies. Remaining restrictions on market access
and the distorting effects of China’s industrial policies also concern members.
Business Performance: Profitability equated with last year’s survey, at 76.5% versus 76.9%, but 6%
more companies stated that 2017 was “very profitable” versus 2016. Some 83% of manufacturers were
profitable, just ahead of retailers (81%), but only 65% of services companies reported profits, down 7%.
57.7% of companies reported higher revenue growth in China than globally, up 7.7% from last year, led
by the retail (70%) and manufacturing (64%) sectors. Chemicals (81%) and pharmaceutical sectors,
medical devices and life sciences (79%) were the top performing industries.
25% of respondents reported their China operations significantly contributed to U.S. head office profits
and 20% said they added to U.S. production and employment.
Investment: 61.6% of companies expect to increase theirChina investment in 2018. In 2017, 53%
of companies made investment increases versus a predicted 62.8%.
Companies declaring China as their number one investment priority rose 3% to 27%, while 30% said
it was their second to third priority (2017: 31%), and 37% said it was one among many investment
destinations (2017: 40%). Only 6% said it was low priority.
Challenges: For the second year, 60% of respondents found that China’s regulatory environment
lacks transparency, which hampers good business practice. Lack of IPR protection (61.6%) and
obtaining required licenses (59.5%) were the top two regulatory challenges.
Rising costs and domestic competition, at 95.6% and 85.7%, were viewed as the greatest operational
challenges.
China’s Cybersecurity Law has disrupted businesses. Of the companies that have been impacted,
41% said the law prevents them from leveraging global systems; 31% said they have had to establish
a local data center and cloud presence, and 28% said this made them less willing to bring data into
China. The government’s VPN policies made work more difficult for 56% of companies.
Policy Environment: 41.5% favor using investment reciprocity as a tool for gaining greater market
access to China versus 40.3% in 2017, although opposition to using reciprocity (15.7%) was almost
double last year (8.6%).
Pressure to transfer technology is most often faced in industries China considers strategically
important, including: aerospace (44%) and chemicals (41%). Overall, 21% faced such pressure.
Retaliatory use of tariffs was supported by only 8.5% of respondents versus the 69% who were opposed.
36% of companies said they expect to indirectly benefit from the Belt and Road Initiative (BRI), 29%
said they will derive no benefit and only 16% believe they will directly benefit from China’s ambitious
cross-continental infrastructure development initiative.
Made in China 2025
is seen as a revenue opportunity by 48% of respondents. 24% held a negative
view.
The survey results, and past surveys, are available online at amcham-shanghai/en/resources/publications。。。。。。