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Report: U.S. companies continue to face challenges in China

| May 21, 2021 | Business Issues

American companies face much more difficulty operating in China compared with their Chinese business counterparts in the U.S., according to a recent report from the American Chamber of Commerce in China (AmCham China).

The report, released on May 11, also noted that certain sectors such as health care and movies run at a disadvantage in China. But a big surprise, according to the group, is that China has been focusing on how to improve protecting intellectual property rights.

Some sectors hurt; improvement in IP

The Chinese market continues to thwart many companies due to structural challenges that do not favor foreign businesses or foreign investors. For example, U.S. and other foreign companies in China face many constraints regarding local investment and must team with a Chinese partner. Chinese companies, meanwhile, face fewer restrictions when setting up shop in the U.S.

According to the AmCham China report, among the U.S. industries that operate at a disadvantage in China include:

  • Health care: Foreign investment in China’s medical institutions cannot exceed 70%. In the U.S., no such limit exists.
  • Cloud computing: Foreign investment in these companies cannot exceed 50%. In the U.S., no such limit exists.
  • Movies: The Chinese government declares that 75% of a film’s revenue remains with Chinese film production companies. The government also makes the film release dates. However, in the U.S., Chinese companies establish their own release dates and may distribute films with no restrictions.

Improved news on the intellectual property front has some people optimistic, though.

The Chinese courts have leaned toward more fairness regarding intellectual property rights when disputes arise. According to AmCham China, nearly half of its members contend that overall improvement has occurred regarding intellectual property rights.

Meanwhile, political tensions between the two countries continue to bring ongoing challenges for the group’s members already in China. As a result, Chinese officials have given preference to its domestic industry players. Those tensions are expected to continue for at least two more years.