2019 China business climate survey has been saved
2019 China business climate survey
Insights on the current business environment in China
Deloitte and AmCham China jointly released 2019 China business climate survey report, highlighting changes in China's business environment during a period marked by heightened uncertainty.
Survey highlights diverse views of AmCham member companies across all major industries
Deloitte and AmCham China's 2019 China business climate survey has served to take an annual pulse check on the business environment in China. This year's report reflects diverse views of AmCham member companies across all major industries. The report covers a wide variety of topics including investment trends and prospects, innovation and intellectual property, regulatory environment, and the impact of tariffs and bilateral trade tensions.
This is the 21st year that AmCham China has surveyed its members on the business environment in China, and the first year it has partnered with Deloitte for data collection and in-depth analysis. The survey was conducted between November 13 and December 16, 2018. It was sent to 771 AmCham China member company representatives, of which 314 completed the majority of the questions.
The overall outlook has shifted from cautious optimism to cautious pessimism, as many longstanding concerns—such as inconsistent regulations and uneven enforcement—persist, even as new challenges—namely bilateral US-China tensions—take center stage. Furthermore, the survey results suggest that the full impact of the tariffs has yet to be felt, with some companies maintaining a “wait and see” attitude.
Despite a general decline in performance relative to 2017, companies are still experiencing modest growth following the lows of 2015. Most companies were profitable, although the share declined slightly in 2018 (to 69 percent from 73 percent in 2017). Service sector companies reported the greatest increase in revenues, while Resources & Industrial (R&I) industry members experienced a sharp decline in profitability. Earnings before interest and tax (EBIT) were also down across the board, though more than a fifth of respondents said their China EBIT margins are higher than those in the rest of the world.
Despite tempered growth and investment expectations, China remains an important market. More than 60 percent of the members still rank China as a top priority market despite current trade tensions, as they continue to see robust domestic consumption and a growing middle class, followed by further economic and market reforms, can bring unprecedented business opportunities. More than 80 percent of member companies said they expected positive industry growth in 2019, though more than half said they expected their industry to grow at no more than 5 percent, below the Chinese government’s forecasted gross domestic product (GDP) growth rate for 2019 of 6.3 percent.
Member companies continue to view the US-China relationship as important for their success in China. However, nearly three-quarters expect bilateral relations to deteriorate or stay the same in 2019. When members were asked to rank their top business challenges, “bilateral tensions”—a new survey option—ranked as a top challenge for businesses in China regardless of sector, just behind rising labor costs, and inconsistent regulations and unclear laws, and enforcement.
Market access restrictions and a lack of regulatory transparency continue to pose significant challenges for members. In technology and other research and development (R&D)-intensive industries, 73 percent of surveyed companies said market access restrictions inhibit their operations. Nearly half of members reported they would consider increasing their investments in China if its markets were open to the same extent as they are in the US. Similarly, one-third of respondents report that they limit China investment because of internet protocol (IP) protection concerns alone, rising to nearly one-half of companies in the Technology and R&I sectors. However, the majority of respondents acknowledged China’s efforts to improve the way in which intellectual property rights (IPR) laws are written and enforced, especially with respect to trademark and brand protection.