Foreign Companies in China Feel Singled-out

Foreign companies in China feel increasingly targeted for unfair enforcement of anti-monopoly and other laws and might cut investment if conditions fail to improve, according to US business group the American Chamber of Commerce in China, aka AmCham China.

Almost half of the companies that responded to AmCham China’s survey believe they are targeted for “selective and subjective enforcement” of anti-monopoly, food safety and other rules, the chamber said in a report. It warned that China faces a growing risk it “will permanently lose its lustre as a desirable investment destination.”

“Many areas of regulation are overly focused on foreign multinationals,” said AmCham China’s chairman, Greg Gilligan.

Of the 164 people who responded to the survey, 60% said they felt ‘less welcome’ in China, up sharply from a similar survey in late 2013 in which 41% of 365 respondents expressed the same sentiment. Companies are “increasingly cautious about future investments,” commented AmCham China

Foreign companies formerly shared a “sense of cooperation” with China’s regulators but believe that has changed over the past two years, said Kim Woodard, a former vice chairman of the American chamber.

“Now, what’s happening is you have aggressive enforcement actions against selected companies,” said Woodard. “That starts to look like another barrier to market access.”

Foreign companies had welcomed plans unveiled by China’s ruling Communist Party in late 2013 to open the state-dominated economy to more private competition and adds to pressures at a time of slowing growth and rising competition from local rivals.

The ruling party under President Xi Jinping has promised to make China’s economy more productive by opening more industries to private and foreign competition. However, Beijing also wants to create national champions in a number of industry sectors. Business groups claims that has led regulators to use a six-year-old anti-monopoly law and other regulations to shield domestic companies from competition.

The European Union Chamber of Commerce in China (EUCCC) also expressed concern last month about the anti-monopoly investigations. It said it received reports of companies being pressured by regulators to accept penalties without a full hearing and avoid involving their governments.

Trade officials from the US, the EU and Japan say they are watching the investigations but have yet to announce whether they consider them a violation of China’s free-trade commitments.

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