Beijing - American companies don't feel welcome in China any more.
And while Chinese President
Xi Jinping defended globalization at the World Economic Forum in Davos, US
companies say his government is not practicing what he preached.
An annual survey of business
conditions by the American Chamber of Commerce, or AmCham, in China found that 4 out 5 companies feel less
welcome in China
than before.
Business ties between the United States and China were once considered the
bedrock of the two countries' relationship. But as President-elect Donald Trump
prepares to take office in Washington,
they have become a major source of friction.
In Davos, Xi made a vigorous
defense of free trade, arguing that "pursuing protectionism is like
locking oneself in a dark room" in the hope of avoiding danger but, in
doing so, cutting off all "light and air."
"No one will emerge as
a winner in a trade war," Xi said.
But while American companies
definitely do not want Trump to start a trade war with China, they are increasingly unhappy with the
way Beijing is
treating them. They argue that Xi's government is turning more toward
protectionism as its economic growth slows.
"AmCham China still steadfastly supports China's active
and constructive participation in the global economic system," the group's
chairman, William Zarit, said in a statement. "However, it is becoming
apparent that the benefits of globalization are being taken for granted or even
forgotten, as the challenges of managing a complex, modern economy increase."
Read also: China prepares to retaliate on trade
Those concerns are mirrored
in other Western countries. German Ambassador Michael Clauss issued a strongly
worded statement Monday complaining of rising concerns among European companies
that Chinese ministries are "trying to tilt the playing field towards
purely domestic companies."
"The political
leadership in China
never ceases to assure us that further opening towards foreign investment, a
level playing field between German and Chinese companies as well as protection
of intellectual property is a priority," Clauss said, adding that many
companies say their problems have actually increased.
"It often appears that
somewhere down the line, political assurances of equal treatment give way to
protectionist tendencies," he said.
AmCham China said economic changes had stalled in China, even as
growth slows. Most companies surveyed said revenue was still rising, but more
said the investment environment was deteriorating rather than improving.
Inconsistent
Their top concern was
"inconsistent regulatory enforcement and unclear laws" - often, rules
adopted and interpreted to favour local companies over foreign ones.
The second-biggest concern
was rising labour costs. The third was "increasing Chinese
protectionism," a factor that did not make the top five last year.
US President-elect Donald Trump speaks to reporters at the entrance to Trump Tower in New York Photo: AP
"Despite a long track
record of employing and training locals and investing in the local community,
when the economy gets tough, the foreign firm is always seen as somehow not
friendly to China," the report quoted a senior country manager in the real
estate and development industry as writing.
China is trying to transform its economy to a more
consumer- and services-led structure, away from a dependence on heavy industry
and exports.
But the "handbrake of
regulation is still firmly on" in sectors that should be driving growth, from
finance and insurance to logistics and health care, AmCham's Zarit complained.
Read also: #WEF2017: Chinese president to defend globalisation
In other words, foreign
companies are being denied some of the best opportunities on offer in China today.
"Globalization doesn't
just mean exporting and buying up foreign assets but also making sure that
Chinese workers, private companies, farmers and consumers benefit from dynamic,
open markets for goods and services," Zarit said.
Trump puts things much more
bluntly. China, he says, is
"ripping us off" - or even "raping" the United States.
Many US business leaders are
worried the next president will start a trade war with China that will
seriously damage their interests here. Trump's threat to raise taxes on
American companies that manufacture abroad - repeated in a Washington Post
interview this past weekend - would represent an even more direct risk to the
interests of many firms.
Instead, what US business
leaders want is pressure on China
to open its economy further to American investment.
Arthur Kroeber, MD of
Gavekal Dragonomics, an economic research firm, said frictions had risen
because the "material fruits" of the United States' engagement with
China had been very unevenly distributed.
But in a client note, he
said the problem could not be solved by "browbeating China to change its
trade policies or bullying US companies to move factories back onshore" -
partly because job losses have had as much to do with cheap automation as with
competition from a global labour force.
Re-set
"A sensible
re-set" of US-China economic relations, he argued, should not look
backward at trade in goods and manufacturing but instead focus on fostering a
better environment for investment, "where the US has more leverage and
China has more to give."
Mei Xinyu, a researcher with
the Commerce Ministry, said Trump's rhetoric would not work on a major economy
such as China and warned
that if the United States
played "low," China
could play "lower."
"So many members of
Trump's administration have business, big business, in China, they
will know the price should there be a trade war," he said.
Of 462 companies responding
to the AmCham China survey, 81 percent said they felt less welcome than before,
up from 77 percent the previous year.
Read also: Trump's trade council is led by China critic
When it comes to recruiting
staff and retaining talent to work in China, 58 percent cited poor air
quality as a challenge, followed by 55 percent who mentioned the high cost of
living.
Asked about the investment
environment, 24 percent said it was improving and 31 percent said it was
deteriorating. A quarter of members have moved capacity out of China in the
past three years or plan to do so.
This week, Chinese media
reported that Oracle, a US computer technology company, plans to lay off about
200 research and development staffers in Beijing as part of a strategic
restructuring, while hard-disk manufacturer Seagate was reported to have shut
down its factory in Suzhou and axed 2 000 jobs amid subdued demand.
tab-stops:list 36.0pt">
mso-fareast-font-family:Arial">-
Luna Lin contributed to this report.
WASHINGTON POST