Foreign Businesses Complain of Lack of Government Support, China Association Says

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Attendees visit the 24th China International Fair for Investment and Trade in Xiamen, Fujian province, on Sept. 7. Photo: VCG

Foreign businesses in China are burdened by problems such as rising supply-chain costs and complain of a lack of policy support compared with domestic rivals, an executive of a Chinese industry association said.

Nearly three-quarters of the foreign companies that took part in a survey by the China Association of Enterprises with Foreign Investment (CAEFI) said the increase in production and logistics costs has had a relatively large impact on their business, with the problem especially prominent in the manufacturing sector, Yuan Gaoqiang, the association’s vice president, said in a recent seminar on cross-border investment. He didn’t disclose how many companies took part in the survey or when it was conducted.

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Foreign businesses in China face increased supply-chain costs and insufficient policy support compared to domestic firms.
Surveys reveal rising production costs, lack of progress in policy implementation, favoritism toward local companies, and significant barriers to cross-border flows.
Net foreign direct investment plummeted to a 23-year low, with a record high outflow of $14.8 billion in Q2, despite government efforts to attract overseas investors.

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Who’s Who

IBM: The article states that government agencies, state-owned enterprises, and some banks in China have mostly replaced their IBM devices with products made by local businesses, reflecting a preference for home-grown technology over foreign brands. This is part of the broader challenges foreign companies face, including concerns about policy support and market access.

American Chamber of Commerce (AmCham) in Shanghai: The American Chamber of Commerce (AmCham) in Shanghai's annual business climate report indicates only 47% of surveyed companies are optimistic about China's business outlook for the next five years, the lowest since 1999. Despite some improvements in government policies and regulatory transparency, there is increased favoritism toward local companies. Their report highlights the impact of geopolitical pressures and China's economic slowdown on investment strategies.

European Union Chamber of Commerce in China (EUCCC): The European Union Chamber of Commerce in China (EUCCC) released its annual position paper on September 11, calling for concrete government action to support foreign investment. The report noted little to no progress on key points from the government's 24-point guideline. Additionally, the EUCCC's business confidence survey in May revealed that 13% of firms had moved or planned to relocate investments from China, citing economic headwinds and U.S.-China tensions.

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What Happened When

August last year：: A 24-point guideline was released, promising overseas companies the same level of government support enjoyed by domestic firms.

First half of the year：: Total utilized FDI in China tumbled 29.1% year-on-year to 498.9 billion yuan ($70 billion) according to data released by the Ministry of Commerce.

Second quarter of this year：: Preliminary data showed a record high outflow of $14.8 billion in net foreign direct investment.

Earlier this month：: The government released an updated negative list, shortening the list of industries where foreign businesses are either restricted or prohibited from investing.

Thursday：: The American Chamber of Commerce (AmCham) in Shanghai’s annual business climate report was released, showing only 47% of companies surveyed were optimistic about China’s business outlook over the next five years.

March 2024：: An action plan was called for the opening-up of more areas to foreign investment.

May 2024：: The EUCCC’s annual business confidence survey showed that 13% of respondents had either moved or decided to shift existing investments from the Chinese mainland to other markets.

Sept. 11, 2024：: The European Union Chamber of Commerce in China (EUCCC) released its annual position paper calling for more tangible government action to support foreign investment.

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