CHINA-US: ECONOMY & TRADE

The American Chamber of Commerce in Shanghai very recently released its 2017 Business Report. Highlights of the Report are: i) Halfway through 2017, American companies were reporting an improved market environment for their goods and services, but a difficult policy environment that poses long-term challenges to the success of U.S. companies. (ii) significant concerns exist about market access, industrial policies and basic fairness with most of those surveyed (56%) believing that Chinese government policy still favors local companies over foreign companies. Healthcare and hospital services (88%) felt this most acutely. By sector, retail was most impacted (73%). Most respondents believe Chinese government policies toward foreign companies have remained the same (40%) or worsened (33%). Only 28% see improvement. (iii) the number of companies reporting China as their number one global investment priority dropped 5.4% to 23.6%. One in five companies is redirecting investment to other locations, with Southeast Asia the top destination. 55% of companies increased their investment in 2016, lower than the levels observed two to three years ago of about 64-65%, and 74% in the 2013 survey. (iv) reflecting the Chinese government’s mid-year stimulus, which helped recharge the economy in late 2016, 73.5% of companies reported revenue growth in 2016, recovering from the 61% recorded in 2015. Retail and services performed better than manufacturing. More companies were profitable (77% vs 71% in 2015), led by the non-consumer electronics and pharmaceutical/medical devices/life sciences industries. (v) 60% of the companies surveyed reported that China’s regulatory environment lacks transparency. Lack of IPR protection and enforcement (64%), obtaining required licenses (63%), and data security and protection of commercial secrets (58%), were top regulatory hindrances to business success. (vi) the top three operational challenges were: rising costs (93%), domestic competition (82%), and lack of talent and capabilities (78%). 73% of respondents reported increased competition from private Chinese companies. (vii)  Sixty-five percent said the Trump administration has had no impact on China investment plans.

The Report additionally stated that US exports to China directly and indirectly supported 2.6 million jobs and totalled US$165 billion in GDP in 2015. Some salient features: (i) In 2016, US goods exports to China totaled US$ 113 billion; (ii) In 2015, the most recent complete year of available data, US services exports to China totaled $47 billion, making China the United States’ third-largest services export market; (iii) Last year, 29 American states exported more than US$1 billion in goods to China and 12 states exported more than $1 billion in services exports. In 2006, only 17 states exported more than $1 billion of goods to China and only one state exported more than $1 billion in services to China – California.(iv) Out of 435 congressional districts, 432 districts had triple-digit growth in service exports to China since 2006; (v) From 2006 to 2015, US services exports to China increased more than 400 percent; (vi) Global trade is slowing, but exports of US goods and services to China continue to outpace exports to other major markets. On average, US goods exports to China grew by 8 percent annually over the past 10 years, more rapidly than to any other trading partner. 






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