Nearly a decade ago, many foreign companies began or significantly increased their presence in China. The country had many attractive business advantages including relaxed regulations, cheap manufacturing costs, and low labor wages, among others. China was providing companies with every reason to invest in its country. Now foreign companies from the US, Europe and Japan are beginning to get the ‘cold-shoulder’ and feel unwelcome in China.
According to a survey conducted by the American Chamber of Commerce, 60% of US companies feel less welcome than before when doing business in China - a 41% increase from last year. A similar survey was administered for European companies with a longstanding existence in China. The results show that 61% of these companies say doing business in China is more difficult
Why the change of heart? Foreign companies from these countries are caught in the middle of a range of changes to China’s economy and as a result feel they are being targeted by Chinese regulations.
One major issue is the fact that China’s economy is slowing and no longer growing at an exponential rate. Foreign companies reported that their revenues are no longer increasing substantially and some are even experiencing a decrease. This is particularly true for foreign companies that have been, rightfully but aggressively, under attack by the Chinese media, hurting their reputation.
Another issue is that the Chinese government is in the process of reforming its economy from a state-led model based on exports and investments to services and consumption. The process has brought new regulations that have increased labor costs and placed stricter rules on foreigners. This intensified scrutiny is creating a hostile environment and making it a difficult economy to operate. Nevertheless foreign businesses would like to continue doing business in China and are being cooperative, but now are cautious moving forward.